The forex market changes rapidly because it is affected by various factors. Traders must analyse the market to get a proper insight into the market. This helps them to minimise the losses and maximise the profit. Candlestick charts are a form of charts that is widely used by the traders trading in the stock market, forex market or any other market.
What Is Candlestick Charts?
Candlestick charts are a form of technical analysis that is used to analyse the market. It is called ‘candlestick chart’ because the lines in the candlestick charts resemble the candles. They have broader use as a tool to analyse the market for investments that vary in time frames. From swing traders and day traders to long-term investors, all can utilise the benefits of candlesticks.
The candlesticks are also known as Japanese candlestick charts. They are excellent tools to detect the market turning points using the live currency rate changes. If the trader using the candlesticks uses the candlesticks properly, he or she can reduce the risky market effects that can impact on their investment.
Features of Candlestick Charts
Here are some features of candlestick charts:
It is easy to understand
One feature of the candlestick that is beneficial for traders is they are extremely easy to understand. A person who is new to technical analysis can understand the details without any trouble and can use them to invest better in the market. The data required to draw the candlestick chart is same as the bar chart (high, low, open and close).
Market turning points are indicated earlier
If a trader checks sessions of Japanese candlesticks, he or she will find that signals of reversals are sent within a few sessions. One does not has to wait for weeks to get an idea about the signals of reversals. A trader can enter and exit the market at the right point of time as market changes will be reflected better in the candlesticks.
Valuable and unique market insights
Traders who use bar charts only get an insight about the market changes in the trends and price movements. Candlestick patterns on the other hand, show the force that forms the foundation of the move in the trend along with the move in the trend.
Can be used by all the traders
Traders with different trading styles can use the candlestick charts. Day traders, swing traders, investors and financial institutions can utilise these charts to analyse the market. Although it has been used widely in Far East but it is now being used internationally.
Enhance western charts
Western technical analysis tools can also be used on the Japanese candlesticks. The timing and trading benefits are enhanced when one merges the western and eastern techniques together.
Understanding candlestick
The real body of the candlesticks is the broadest part, representing the range between opening and closing of a session. When reading a candlestick, one has to remember that the real body will be black if the closing is lower than the opening. While the real body will be white if the opening is lower than the closing.
The thin line appearing above and below the broadest part of the candle is called shadow. They are also referred to as wicks of candlesticks. The peak of the upper shadow shows the session’s high and bottom point of the lower shadow shows the session’s low point. When colour and the length of the real body is analysed together they reveal the bull or bear market.
Japanese candlestick is a very easy and useful market analysis tool that can be used by traders to find out about the market turning points.
