Japanese Candles Patterns Explained
Understanding Candles in Energies Trading - How to Read Candles in Energies Trading - Japanese Trading Candle Setups ExplainedBrief History
Candlestick were developed in the 18th century by the legendary rice trader called Homma Munehisa to give the overview of opening, high, low & closing market price over a given period of time.
They were used by the legendary rice trader to predict future market prices. After dominating the rice market, Munehisa eventually moved to the Tokyo exchanges where he gained a huge trading fortune using this analysis. He is said to have made over a hundred consecutive winning trades.
Types of Energies Trading charts
There are 3 types of charts used in Energies: Line, bar and candles.
Line - plots a continuous line connecting closing prices of a energies.
Bars- displayed as sequence of OHCL bars. O-H-C-L represents OPEN HIGH LOW & CLOSE. The Opening price is highligthed as a horizontal dash on the left & closing price as a horizontal dash on right.
The main disadvantage of a bars is that it's not visually appealing, therefore most traders don't use them.
Candlesticks - these use the same price data as bar charts (open, high, low, and close). However, they in a much more visually identifiable way which resembles a candle with wicks on both its ends.
How to Interpret
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) - Prices moved up
- (Red Color) - Prices moved 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 price moves down.
Candles Vs. Bar Chart
When candlesticks are used it is very easy to see if the 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 market. These patterns have different technical analysis explanation and the most common are:
The above patterns is what makes the Japanese candlesticks popular among technical traders and it is why this type of analysis are the most widely used when it comes to analyzing the market. The analysis for these pattern setups in energies trading is the same as that one used in stock trading.
Drawing These Charts on MetaTrader 4 Software
To draw these on the MT4, select the charts plotting tools within the "MT4 Toolbar" - shown below.
To view this toolbar in MT4 go to "View" Next to file at the top left corner of the MT4 Platform, Click "View", Then Click "Toolbars", Then check the "Charts" Button. The above toolbar will appear.
Once the above tool bar, 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 shown above, for line format click the line tool button, for Japanese candlesticks format click the "candlesticks tool button".
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