Japanese Candles Patterns Gold Technical Analysis
Japanese Candlestick Patterns TutorialBrief 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 xauusd price over a given time period.
They were used by the legendary rice trader to predict future market xauusd prices. After dominating 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 XAUUSD charts
There are 3 types of charts used in Gold: Line, bar and candles.
Line - plots a continuous line connecting closing xauusd trading prices of gold.
Bars- displayed as sequence of OHCL bars. O-H-C-L represents OPEN HIGH LOW & CLOSE. The Opening xauusd trading price is displayed as a horizontal dash on the left & closing xauusd 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 xauusd price data as the bar charts (open, high, low, and close). However, they are represented in a much more visually identifiable way that looks like a candlestick with wicks on both its ends.
How to Interpret
The rectangle part is known as the body.
The high & low are described as shadows & plotted as poking lines.
The color is either blue or red
- (Blue or Green Color) - Gold Prices moved up
- (Red Color) - Gold Prices moved down
Most trading platforms like the MT4, use colors to mark the direction. Colors used are blue or green: when price moves up, red: when price moves down.
Candle Sticks Vs. Bar Chart
When candles are used it is very easy to see if the xauusd 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 Gold Trading market. These patterns have different technical analysis interpretation and 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 gold market. The analysis for these pattern formations in gold trading is the same as that one used in stocks trading.
Drawing These Charts on MT4
To draw these on the MT4, choose the charts drawing tools within the "MT4 Toolbar" - shown below.
To view this tool-bar in MetaTrader 4 navigate to "View" Next to file at top left corner of the MT4 Platform, Click "View", Then Click "Tool bars", Then check the "Charts" Button. The 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 key as shown above, for line format click the line tool button, for Japanese candlesticks format click the "candlesticks tool button key".
