Forex Candlestick Trading Method

Forex Candlestick Trading Method

When you are dealing with Forex, you cannot ignore the importance and impact of a methodology involving Technical analysis of the market. It is important to predict future price trends from available price and volume data.

An effective technical analysis takes care of all fundamentals, including expectations, and is reflected in exchange rates. This branch of studies evolved from empirical observations of financial markets over hundreds of years.

The oldest is perhaps the Candlestick Techniques used by the Japanese Rice traders which date back to the 18th century and surprisingly popular till today.

Candlestick technique originated in Japan when Munehisa Homma of Dojima Rice Exchange used past prices to predict future price movements and generated an enormous amount of wealth. The concept was adopted to analyze the Forex market which later proved to be extremely effective.


Candlestick Forex Trading For Pinpoint Accuracy

The Candlestick trading incorporates the thought processes of the majority of the investors in the markets and therefore generates visual signals of an investors’ emotion! That is the reason behind the greater appeal of a Candlestick chart over other charting methods like bar charts.

It presents the same data with a dramatically dynamic visual interpretation. If you can recognize the change in an investor’s sentiment your profits will multiply by utilizing the added information depicted in the signals.

The Candlesticks have basic patterns comprise of Long days, Short days, White Marubozu, Black Marubozu, Spinning tops, Stars, Rain drops. The reversal patterns, Dark Cloud Cover, Engulfing, Evening Star, Harami, Morning Star Doji, Piercing Line, Three Black Crows, and Three White Soldiers. A single candle pattern can be Doji's (Dragonfly Doji or Gravestone Doji), Hammers/Hanging Man, Shooting Star, Hollow Red Candle and Filled Black Candle

The open, high, low, and close are depicted in a candlestick. If the close is higher than the open, the candlestick is hollow or white. If the close is lower than the open, the candlestick is filled or black. The hollow or filled section of the candlestick is the body while the thin lines above and below the body represent the period's entire trading range - which are called shadows.

The top of the upper shadow represents the high and the bottom of the lower shadow represents the low. The candlestick shadow reflects the intra-period high and low. The periods can be 5 min, 15 min, 1 hour, daily and weekly. If you find long shadows, it means the trading extended well beyond the opening and/or closing price. On the other hand a short shadow will tell you that the trading was confined closely to the open and/or closing price.

Generate Amazing Forex Wealth

If you know how to read the Candlestick charts you may be surprised to find out the amazing trends it reflects. A Long white candlestick will show strong buying pressure.

This means that the prices advanced significantly from open to close and buyers were quite aggressive. After an extended period of declines, long white candlesticks can mark a turning point or support level.

A Long black candlestick reflects strong selling pressure. The longer the black candlestick is, the further the close is below the open. This shows that the prices declined significantly from the open and sellers were aggressive. After a long decline a long black candlestick can indicate panic or capitulation.

Potent long candlestick in Marubozu brothers, which do not have upper or lower shadows, the high and low are represented by the open or close. A White Marubozu is formed when the open equals the low and the close equals the high, indicating that the buyers controlled the price action. Black Marubozu form when the open equals the high and the close equals the low. This indicates that sellers controlled the price action.

The Candlestick signal empowers you with the ability to pinpoint a change of direction. If you use other technical methods as supplemental tools it can generate enormous amount of wealth for you in Forex trading.

On the next page we will show you where you can download a free evaluation version of one of the best Forex analysis software packages available anywhere.