Japanese Candles Patterns Gold Analysis
Japanese Candle Patterns TutorialBrief History
Candles were created in the 18th century by a renowned rice trader known & referred to as Homma Munehisa to provide an overview of the opening, high, low and closing price over a given and specified period of time.
They were used by the renowned rice trader to predict the future prices. After dominating the rice market, Munehisa after that he eventually moved and went to the Tokyo Exchange where he gained & gathered huge fortunes using this analysis method. He's said to have made over than one hundred consecutive winning trade transactions.
Types of charts
There are three types of charts used in XAU USD: Line, bar and candles.
Line - draws a continuous line joining closing gold trading prices of gold.
Bars- displayed as sequence of OHCL bars. OHCL represents OPEN HIGH LOW and CLOSE. The Opening gold trading price is highlighted as a horizontal hyphen to the left and closing gold trading price as a horizontal hyphen to the right.
The main disadvantage of a bar chart is that it's not visually appealing and identifiable, thence most traders do not use them.
Candles - these use the same price data as the bar charts (open, high, low, & close). However, they're represented in a more visually identifiable and appealing way which resembles a candlestick that has wicks on both its ends.
How to Analyze
The rectangle part is known as the body.
The high & low are referred to as shadows & drawn as poking lines.
The color is either blue or red
- (Blue or Green Color) - Gold Prices moved up
- (Red Color) - Gold Prices went down
Most trading softwaresplatforms such as the MT4, use colours to mark the direction. Color used are green or blue: when price moves & heads up, red: when price moves & heads downward.
Candles Vs. Bar Chart
When candles are used it is very easy to see if the price moved upward or downward as compared to when a bar Charts are used.
The Japanese techniques also have very many set-ups that are used to trade the markets. These patterns have different technical analysis interpretation and the most common are:
The above patterns is what makes the Japanese candles 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 setups in Gold trade is the same as that one used in stock trading.
Drawing These Charts in the MetaTrader 4 Platform
To draw these on the MT4, select the charts drawing tools within the "MT4 Tool-Bar" - illustrated below.
To view this tool bar in MT4 go to "View" Next to file on top left corner of the MT4 Platform, Click "View", Then Click "Tool-Bars", Then tick "Charts" Button. The above tool-bar will appear.
Once the above toolbar, pops up you as a trader can then choose & select the type you as a trader want to convert to, If you as a trader want to view using the bar chart format, click the bar tool button such as shown above, for line format press the line tool button, for Japanese candles format click the "candles tool button".
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