You may find this term "Japanese Candlestick" sounds crazy, but believe me it is used by every forex and stock trader in the world to keep track of past prices of financial instruments. This is not a 21st century invention rather the history of Candlestick lead us to 17th century. It was used by rice traders to keep track and visualize the movement of price of Rice. Rest of the stories about Candlesticks are just stories and no one know much history about it.
His ideas was modified and developed to lead us to modern worlds candlestick.
Homma made the candlestick trading methods popluar and it spread to United States during the late 18th century. Charles Dow later developed technical analysis and price action. Charles Dow is know as founder of famous Wall Street Journal and the man who created Dow Jones Industrial Average.
I hope by now you have some idea about candlestick and its history. Now it is important for you to know the anatomy of candles before we learn about the ways to use patterns in candlesticks.
If you refer to the above image you could see that the white candle have open price below and close price above. It is called as bullish candle and it show that the price has increased. the higher and lower shadows are the price movement between the candle open time and close time. The candle with open price above and closed price below is called as Bearish candle. It means the price has gone down. Sometime you may find shadows missing. If upper shadow is missing then the highest price and closing price are the same. It is vice versa if lower shadow is missing.
If you have meta trader platform i want you to load EURUSD daily timeframe chart. This is just an exercise. If you have a look at the chart you can easily spot several gaps in it. It is because of gaps formed when markets are opened after weekend.
The main reason for such thing to happen is various events occurred during the weekend which affect the price of the currency exchange. Since the market is closed at that time it reflects with a gap when market open on Monday. Because of such unexpected price movement most traders will liquidate their position on Friday itself, so that they can rest in peace during the weekend.
Most price action traders use 4hr and 1D timeframes. But it is similar even if you use 1m, 5m, 15m , 1h etc
I hope by now you must have an idea about what Japanese candlesticks are and how we can use them in price action trading. If you have any doubts feel free to comment below. Have a great day :)
One person to whom the credit has to be given is Homma from Sakata.
His ideas was modified and developed to lead us to modern worlds candlestick.
Homma made the candlestick trading methods popluar and it spread to United States during the late 18th century. Charles Dow later developed technical analysis and price action. Charles Dow is know as founder of famous Wall Street Journal and the man who created Dow Jones Industrial Average.
Candlesticks and its structure
If you refer to the above image you could see that the white candle have open price below and close price above. It is called as bullish candle and it show that the price has increased. the higher and lower shadows are the price movement between the candle open time and close time. The candle with open price above and closed price below is called as Bearish candle. It means the price has gone down. Sometime you may find shadows missing. If upper shadow is missing then the highest price and closing price are the same. It is vice versa if lower shadow is missing.
If you have meta trader platform i want you to load EURUSD daily timeframe chart. This is just an exercise. If you have a look at the chart you can easily spot several gaps in it. It is because of gaps formed when markets are opened after weekend.
The main reason for such thing to happen is various events occurred during the weekend which affect the price of the currency exchange. Since the market is closed at that time it reflects with a gap when market open on Monday. Because of such unexpected price movement most traders will liquidate their position on Friday itself, so that they can rest in peace during the weekend.
One advantage of Japanese candlestick is it can be used for all the timeframes.
Most price action traders use 4hr and 1D timeframes. But it is similar even if you use 1m, 5m, 15m , 1h etc
I hope by now you must have an idea about what Japanese candlesticks are and how we can use them in price action trading. If you have any doubts feel free to comment below. Have a great day :)