Japanese Oil Candlesticks Patterns Explained
Japanese Crude Oil Candle Patterns PDFBrief History
Candlesticks were created in the 18th century by legendary rice trader known as Homma Munehisa to give overview of the opening, high, low and closing market crude oil price over a given time period.
They were used by the legendary rice trader to predict future market crude oil prices. After dominating the rice market, Munehisa then eventually moved to Tokyo Exchanges where he then gained a huge fortune using this trading analysis. It is said that He made over hundred consecutive winning trades.
Types of Oil Trading charts
There are 3 types of charts used in Oil: Line, bar & candles.
Line - plots a continuous line connecting closing crude trading prices of a crude oil.
Bars- displayed as sequence of OHCL bars. O H C L represents OPEN HIGH LOW and CLOSE. The Opening crude trading price is displayed as a horizontal dash on left and closing crude oil price as a horizontal dash on the right.
The main disadvantage of a bars is that it isn't visually appealing, therefore most traders don't use them.
Candlesticks - these use the same crude trading price data as bar oil charts (open, high, low, and close). However, they in a much more visually identifiable way which resembles a candle stick with wicks on both ends.
How to Analyze
Rectangle section is called the body.
The high & low are described as shadows and drawn as poking lines.
The color is either blue or red
- (Blue or Green Color) - Oil Prices moved up
- (Red Color) - Oil Prices moved down
Most trading platforms like the MT4, use colors to mark the direction. Colors used are blue or green: when crude trading price moves up, red: when crude trading price moves down.
Candles Vs. Bar Oil Trading Chart
When candlesticks are used it is very easy to see if the crude oil 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 Oil 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 and it's why this type of analysis are the most widely used when it comes to analyzing the crude oil market. The analysis for these pattern formations in oil trading is the same as that one used in stocks trading.
Drawing These Charts in MetaTrader 4 Platform
To draw these on the MT4, select the charts plotting tools within the "MT4 Tool-bar" - shown below.
To view this toolbar on MT4 navigate to 'View' Next to file at the top left corner of MT4 Platform, Click 'View', Then Click 'Tool bars', Then check 'Charts' Button. Above toolbar will appear.
Once the above toolbar, appears you can then choose 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, for Japanese candles format click the "candlesticks tool button".
