If you’re using technical analysis as one of your forex trading strategies you probably use candlestick charts. Candlestick charts are one of the three options (along with bar and line charts) and are the most popular with modern traders as they give the most vivid picture of what’s happening in the market. But are you using them to their full advantage?
By studying candlestick charts you can get an immediate picture of the opening, closing, low and high prices for the period he has chosen. But that’s not all the candles can reveal.
A skilled candlestick reader can gain much insight into the sentiment, strength and momentum of the market just by studying the shapes and patterns of the candles. Some successful traders spurn all indicators and just focus on what the candlesticks reveal about price action.
Candlestick charting dates back centuries to 18th century Osaka when legendary rice trader Homma Munehisa used them to corner the market. Japan’s long isolation meant that candlestick techniques remained hidden from the rest of the world.
But then trader Steve Nison researched the candlestick charting method in the 1990s via old Japanese documents. Nison was quick to appreciate the Zen-like beauty of the candlestick trading method and went on to champion the system in a series of popular books.
Nison’s books are extremely comprehensive detailing a host of candlestick formations including dark-cloud over, hanging man, morning and evening stars, and the celebrated doji, with its various incarnations such as dragonfly doji and gravestone doji.
You might be overwhelmed by reading through such books but actually you just need a small group of candlestick patterns to use with confidence and clarity on a daily basis. You just need to know which patterns to focus on and how to properly interpret what they tell you.
Candles never lie but divining their message is not always straightforward. You need to devote some time to understanding just what they’re telling you. Make candlestick reading one of your forex trading strategies and get ready for currency trading success.