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 the 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 three types of charts used in XAUUSD: Line, bar and candles.

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

Bars- displayed as sequence of OHCL bars. OHCL 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.

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

Candles - 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 Analyze

The rectangle part is known as the body.

The high and low are referered to as shadows and drawn as poking lines.

The colour is either blue or red

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

Most trading softwaresplatforms like the MT4, use colours to mark the direction. Color used are blue or green: when price moves up, red: when the price moves down.

Candles 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 set-ups 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.

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

Once the above toolbar, pops up you can then choose 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 as shown above, for line format press the line tool button, for Japanese candlesticks format click the "candlesticks tool button".

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