Today I want to talk a little about Japanese candlesticks. Candlesticks provide unique visual cues that make reading price action a lot easier.

1. What are the Candlesticks telling you?
Today I want to talk a little about Japanese candlesticks. The
candlesticks provide unique visual cues that make reading price action a
lot easier, not only do they help you understand the market sentiment,
but they offer so much more then the traditional Forex bar chart.
Take a look at this traditional line chart below
Now as you can see, from the example above, the chart is very dull and
boring, you can see the open and close price's represented by the
horizontal lines but its not very clear and hard to read easily.
Now take a look at this Japanese candlestick example

2. This looks a lot better, you can clearly see the open and close at a glance,
also the best thing is, you can see straight away if the candle is bullish or
bearish as each candle is represented by two colours
Green = Bullish
Red = Bearish
The colour of the body of the candlestick represents the difference
between the open and closing price and whether the day's (or weeks or
year's) market closed up or down.
The wicks (or shadows) show the extreme lows and highs of price for the
currency that day.

3. However just looking at the candlesticks alone is not the only way to
gauge price action, the candlesticks alone does not give you enough to
determine the market sentiment. Traders tend to use candlesticks with
other technical indicators like moving averages, I of course use the
Ichimoku indicator for my complete view of the market, the mixture of
Japanese Candlesticks with the Ichimoku indicator is one of the most
accurate way to trade, if you haven't checked out my Blog all about
Ichimoku, check it out here
Popular Candlestick Patterns
To further strengthen your analysis of the chart we can however look for
specific patterns from the candlesticks to spot strengths or weakness in
future price movement.
Many of these candlesticks patterns have eccentric names like, Dark
cloud cover, Morning star or Engulfing Pattern, these are based on
direct translations of their original Japanese names.
In future updates I will go into more detail about all the patterns you
will come across, for now though I want to show you some of the
important ones so you can start watching the charts and looking out for
them.
Bearish Reversal Patterns
"Abandoned Baby"
The Abandoned Baby is a bearish reversal pattern characterized by a

4. large move up followed by a doji or small candle, and then a third candle
heading in the opposite direction.
This is a very strong reversal pattern so keep an eye out for this one.
"Bearish Dark Cloud Cover"
Bearish Dark Cloud Pattern is a two candlestick pattern. This is also a
very strong reversal pattern and is very common.
The pattern consists of two candlesticks, the first one is a strong bullish
candlestick. The second candlestick opens above the previous
candlestick but closes below forming a bearish candlestick.
"Bearish Evening Star"

5. Evening star is a strong reversal pattern and is a three candlestick
pattern. The first candlestick is a strong bullish candlestick. The second
candlestick is small bullish or bearish candlestick. The third candlestick
is a strong bearish candlestick.
Bullish Reversal Patterns
These are the same as the Bearish patterns, just the opposite way round.
In future posts I will also cover some strong continuation patterns, these
are patterns that show a strong possibility that price action may
continue to carry moving in the same direction.
Look out for future posts where I will dig a little deeper into candlestick
analysis and show you some more patterns.
Until next time
Chris(admin)