Japanese Commodity Trading Candles Patterns Explained
Understanding Candles in Commodities Trading - How to Read Candles in Commodities Trading - Japanese Commodities Trading Candlestick Patterns ExplainedBrief History
Candlesticks were developed in the 18th century by the legendary rice trader called Homma Munehisa to give overview of the opening, high, low and closing market commodities trading price over a given time period.
They were used by the legendary rice trader to predict future market commodity prices. After dominating trading the rice market, Munehisa after that eventually moved to Tokyo Exchange where he gained huge fortunes using this analysis method. He is said to have made over one hundred consecutive winning trades.
Types of Commodity Trading charts
There are Three types of charts used in Commodities: Line, bar and candlesticks.
Line - plots a continuous line connecting closing commodities trading prices of a commodity.
Bars- displayed as sequence of OHCL bars. O-H-C-L represents OPEN HIGH LOW & CLOSE. The Opening commodities trading price is displayed as a horizontal dash on the left & closing commodities trading price as a horizontal dash on the right.
The main disadvantage of a bars is that it is not visually appealing, therefore most traders don't use them.
Candlesticks - these use the same commodities trading price data as bar commodity charts (open, high, low, and close). However, they in a much more visually identifiable way which resembles a candle with wicks on both ends.
How to Interpret
Rectangle section is called the body.
The high and low are described as shadows & plotted as poking lines.
The color is either blue or red
- (Blue or Green Color) - Commodities Prices moved up
- (Red Color) - Commodities Prices moved down
Most trading platforms like the MT4, use colors to mark the direction. Colors used are blue or green: when commodities trading price moves up, red: when commodities trading price moves down.
Candle Sticks Vs. Bar Commodities Trading Chart
When candles are used it's very easy to see if the commodities price moved up or down as opposed to when a bar Charts are used.
The Japanese techniques also have very many formations that are used to trade the Commodities market. These patterns have different technical analysis explanation & the most common are:
The above patterns is what makes the Japanese candlesticks popular among technical traders & it is why this type of analysis are the most widely used when it comes to analyzing the commodities market. The analysis for these pattern formations in commodities trading is the same as that one used in stock trading.
Drawing These Charts on MT4 Software
To draw these on the MT4, choose the charts drawing tools within the "MetaTrader 4 Toolbar" - shown below.
To view this tool-bar in MetaTrader 4 go to 'View' Next to file at top left corner of MT4 Platform, Click 'View', Then Click 'Toolbars', Then check 'Charts' Button Key. Above tool bar will appear.
Once the above tool-bar, pops up you can then select the type you want to convert to, If you want to view using the bar format, click the bar tool button as illustrated above, for line format click the line tool button key, for Japanese candlesticks format click the "candlesticks tool button".
