Japanese Stock Candlesticks Patterns Stock Technical Analysis
Japanese Stocks Candle Patterns TutorialBrief History
Candlesticks were developed in the 18th century by the legendary rice trader called Homma Munehisa to give an overview of the opening, high, low & closing market stock price over a given period of time.
They were used by legendary rice trader to predict future market stock 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 Stocks charts
There are 3 types of charts used in Stock: Line, bar & candles.
Line - plots a continuous line connecting closing stock prices of stock.
Bars- displayed as sequence of OHCL bars. O-H-C-L represents OPEN HIGH LOW & CLOSE. The Opening stocks price is displayed as a horizontal dash on the left and closing stock price as a horizontal dash on the right.
The main disadvantage of a bars is that it is not visually appealing, therefore most traders don't use them.
Candlesticks - these use the same stocks price data as bar stock charts (open, high, low, and close). However, they in a much more visually identifiable way which resembles a candlestick with wicks on both its ends.
How to Analyze
Rectangle part is called the body.
The high & low are described as shadows and plotted as poking lines.
The color is either blue or red
- (Blue or Green Color) - Stock Prices moved up
- (Red Color) - Stock Prices moved down
Most trading platforms like the MT4, use colors to mark the direction. Colors used are blue or green: when stocks price moves up, red: when stocks price moves down.
Candle Sticks Vs. Bar Stocks Trading Chart
When candles are used it is very easy to see if the stocks price moved up or down as opposed to when a bars are used.
The Japanese techniques also have very many formations that are used to trade the Stock Trading market. These patterns have different technical analysis interpretation & 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 stocks market. The analysis for these pattern formations in stock trading is the same as that one used in stocks trading.
Drawing These Charts in MetaTrader 4 Software
To draw these on the MT4, choose the charts drawing tools within the "MT4 Toolbar" 512 - shown below.
To view this toolbar in MetaTrader 4 go to "View" Next to file at top left corner of MT4 Platform, Click "View", Then Click "Tool bars", Then check the "Charts" Button. The above tool bar will appear.
Once the above toolbar, pops up 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 key as shown above, for line format click the line tool button, for Japanese candles format click the "candlesticks tool button key".
