Trade Gold Trading

Japanese Candles Patterns Gold Analysis

Japanese Candlestick Patterns Tutorial

Brief History

Candlesticks were developed in the 18th century by the legendary rice trader known as Homma Munehisa to give the overview of opening, high, low & closing market price over a given time period.

They were used by legendary rice trader to predict future market prices. After dominating the rice market, Munehisa after that eventually moved to Tokyo Exchange where he gained huge fortunes using this analysis method. He's said to have made over than one hundred consecutive winning trades.

Types of charts

There are 3 types of charts used in XAUUSD: Line, bar and candles.

Line - plots a continuous line connecting closing xauusd trading prices of gold.

How Do I Use Japanese Candles in XAUUSD Trading? - Candles Chart Types

Bars- displayed as sequence of OHCL bars. O-H-C-L represents OPEN HIGH LOW and CLOSE. The Opening xauusd trading price is highlighted as a horizontal hyphen to the left and closing xauusd trading price as a horizontal hyphen to the right.

How to Trade Candles Setups Strategies - How Do You Interpret Candlestick Pattern?

The main disadvantage of a bars is that it's not visually appealing, therefore most traders do not use them.

Candlesticks - these use the same price data as the bar charts (open, high, low, & close). However, they are represented in a much more visually identifiable way which looks like a candlestick that has wicks on both its ends.

How to Interpret

The rectangle part is known as the body.

The high and low are described as shadows and plotted as poking lines.

Japanese Candlesticks Setups Technical Analysis - How Do I Use Japanese Candlestick in XAUUSD Trading?

Gold Broker

The colour is either blue or red

  • (Blue or Green Color) - Gold Prices moved up
  • (Red Color) - Gold Prices went down

Most trading softwares like the MT4, use colors to mark the direction. Colors used are blue or green: when price moves up, red: when the price moves down.

How to Use Japanese Candlestick in XAUUSD - Candle Pattern Strategies Explained

Candlesticks Vs. Bar Chart

When candlesticks are used it's very easy to see if the price headed upward or downward as opposed to when a bar Charts are used.

The Japanese techniques also have very many setups that are used to trade the market. These patterns have different technical analysis interpretation and the most common are:

Marubozu Candle Pattern and Doji Candle Pattern
Spinning Tops
Reversal Setups
Inverted Hammer Candle Pattern & Shooting Star Candle Pattern
Piercing Line Candlestick Pattern and Dark Cloud Cover Candle Pattern
Morning Star Candles & Evening Star Candles

The above patterns is what makes the Japanese candlesticks popular among technical traders and it's why this type of analysis are the most widely used in analyzing the market. The analysis for these pattern formations in trade is the same as that one used in stock trading.

Drawing These Charts in MetaTrader 4

To draw these on the MetaTrader 4, select the charts drawing tools within the "MT4 Tool-Bar" - shown below.

How to Use Japanese Candlestick in Gold - How Do I Analyze Candles Pattern Analysis?

To view this tool bar in MetaTrader 4 navigate to "View" Next to file at top left corner of the MetaTrader 4 Platform, Click "View", Then Click "ToolBars", Then check the "Charts" Button. The above tool-bar will appear.

Once the above toolbar, pops up you can then choose the type you want to convert to, If you want to view using the bar chart format, click the bar tool button key as shown above, for line format click the line tool button, for Japanese candlesticks format click the "candlesticks tool button key".