Japanese Candles Patterns
Japanese Candles were developed in the 18th century by the legendary rice trader called Homma Munehisa who used these candlesticks to give an overview of opening price, high, low and closing market price over a given period of time.
The candlesticks charts 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 fortune using this candlesticks analysis. He is said to have made over 100 consecutive winning trades.
Types of XAUUSD Charts
There are 3 types of charts used in XAUUSD charts: Line charts, bar charts & candlesticks charts.
Line charts
Line charts - line charts are plotted using a continuous line connecting closing prices of a XAUUSD, Gold metal.
XAUUSD Line Chart
Bar Charts
Bar charts - bar charts are displayed as sequence of OHCL bars. OHCL represents OPEN HIGH LOW & CLOSE price. Opening price is displayed as a horizontal hyphen to the left and the closing price is portrayed as a horizontal hyphen to the right.
XAUUSD Bar Charts
The main disadvantage of bar charts is that they are not visually appealing; therefore most Gold traders don't use these charts.
Candlestick Charts
Candlestick Charts - candle charts use the same price data as bar charts (open, high, low, and close price). However, these charts are presented in a much more visually identifiable way which resembles a candlestick with wicks on both ends.
XAUUSD Candles Charts
How to Interpret Japanese Candles Charts
The rectangle part is called the body of the candlestick.
The high and low are described as shadows & plotted as poking lines.The color is either blue or red
- (Blue or Green Color) - Shows prices moved up
- (Red Color) - Shows prices moved down
Most trading platforms like the MetaTrader 4, use colors to mark direction of candlesticks. Colors used are blue or green: when price moves up and red: when the price moves down.
When candlesticks charts are used it is very easy to see if the price headed up/down as compared to when the bar charts are used.
Gold Candles Charts vs Bar Charts
The Japanese candlesticks charting techniques also have very many formations that are used to trade the XAUUSD Metal. These candlestick patterns have different technical analysis interpretation & the most common Japanese candlesticks patterns are:
- Marubozu & Doji candlesticks
- Spinning Tops candlesticks
- Reversal Patterns candlesticks
- Inverted Hammer & Shooting Star candlesticks
- Piercing Line & Dark Cloud Cover candlesticks
- Morning Star & Evening Star candlesticks
The above Japanese Candlesticks patterns is what makes the Japanese candlesticks charting popular among technical traders & it is why this type of analysis is the most widely used when it comes to analyzing the Gold metal prices. The analysis for these candlesticks pattern formations in XAUUSD trading is the same as that one used in stocks trading as well as FX trading.
Drawing These Candles Charts in MetaTrader 4 Platform Software
To draw these candlesticks charts on the MetaTrader 4 platform, select the charts drawing tools within the "MT4 ToolBar" as illustrated below.
MetaTrader 4 Charts Drawing ToolBar
To view this charts tool-bar on MT4 go to "View" Next to file at the top left corner of the MetaTrader 4 Software, Click "View", Then Click "ToolBars", Then check the "Charts" Button. The above tool-bar will appear.
Once the above charts toolbar, appears you can then select the chart type you want to convert to, If you as a trader wants to view using bar chart format, click the bar chart tool-bar button as shown above, for line charts format click line chart tool-bar button, for Japanese candlesticks format click the "candlesticks chart toolbar button".
