Candlestick analysis a source of profit in the online trading
At the first stage of acquaintance with the Forex market, beginners, as a rule, are lost when they hear about such a thing as Japanese candles or Forex candle analysis - a fundamental component of price activity. The method of analysis of candlestick data appeared in the eighteenth century in Japan, it was used to predict the probable value of rice. To date, the analysis of candlestick configurations is successfully used on Forex, as an auxiliary signal to establish the direction of prices, in order to determine the moment of entry and exit to the market.
Candlestick analysis: basic configurations
In order to conduct a qualitative analysis of Japanese candles, it is necessary to study three basic postulates that are based on the configuration of the candles: its color, the length of the candle itself, and also the shadow.
If the candle is black, then the price tends to down, if it is painted white, then, on the contrary, to the top.
With the increase in the length of the Japanese candle, and the shortening of its shadow, the cost continues to move in the prescribed direction. Inversely proportional situation: with the lengthening of the shadow and the shortening of the body, the likelihood that the cost will go in the direction opposite to the given shadow increases.
Star and hammer
The above configurations of candles are identical patterns in terms of shape, meaning the cessation of the uptrend. In practice, these are short candles over which a long shadow is raised over its length. A “shooting star” signals the formation of a strong position, and as practice shows, it is located at the top of an uptrend, in turn, as an “inverted hammer” - this is an unstable or even weak position. In the case of the inverted hammer, an increase or decrease in the trend, and, consequently, prices, is possible. In order to avoid unpleasant situations, before the start of trading, a candle analysis should be carried out, and also wait for the appearance of a signal candle.
Candles, codenamed “hammer and hanged,” refer to models of a different configuration, unlike those described previously (a long shadow located under the short body of the candle). The formation of a strong position is assigned to the hammer candle, with a high degree of certainty it can be said that it is at the bottom of the bearish trend, indicating an imminent change in the price movement vector. A radically opposite situation is formed at the top of the market: the “increased” candlestick holds a weak position, however, this interpretation of the continuation of the trend is very ambiguous, in other words, the movement of the price and the trend itself can continue equally in any direction. For a more accurate adjustment of further actions, a candle may be required - confirmation of a possible trend.
The main parameter for all types of candles considered in this article is precisely the length of their shadow and in no case color affiliation.