Each trader analyzes the market in its own way. There are many different market analysis tools, but many technical analysis experts rely on candlestick analysis — the Japanese candlestick analysis. It can not only help predict the direction of the market, but is also interesting in itself. The schedule of such candles is very similar to the schedule of bars. Despite the fact that the schedule of bars is considered Western. Although they have different names and appearance, they give the same price information.
How are Japanese candles built? The formation of candlesticks is based on the data on which bars are built. There is also the opening price of the candle, the maximum of the candle, its minimum, and the closing price of the candle. A Japanese candle also has a body. What is the body of the candle? This is a rectangle, which in turn indicates the price range between the beginning – the opening, and the closing of the trading session. Suppose a candle has a black body. But it may be of another color. Each trader chooses a color by himself.
So, the black body of the candle indicates that at the time of the session closing, the price was lower than at the opening. If the candle, or rather her body, is white, in this case the price at the time of closing was greater than the price at the time of opening. But the candle is not only one body. She also has shadows. Shadows – thin lines that may be above the body of the candle, or under it. They point to the extreme price that was observed during the session. If the line is above the body, then the highest point indicates the maximum maximum price of the currency. If the line is under the body of the candle, it will show the minimum price per session. The similarity of the two charts, the schedule of Japanese candles and the schedule of bars, lies precisely in the shadows of the candles. Many experienced traders say that significant fluctuations in the price shows the body of the candle. Shadows show slight fluctuations. The color of the candle may be different. This is a trader’s business. But there is a tradition according to which “Yin” is a black candle, and “Yang” is a white one. And the East gives these two concepts quite a lot of importance.
Formed Japanese candles based on the situation on the market. There are thirteen types of candles that are typical for flat, bull market, and bearish. In the analysis, the trader first pays attention to the strength of the candle body itself, then to the power of the shadow. There is also the power of denial, by which one can predict the direction of price. The body of the candle can be of different lengths. The length indicates price intensity. The longer the body, the greater the likelihood that the price will move in one direction or the other. Shadows also come in different lengths.
The longer the shadow of the candle, the greater the likelihood of a trend reversal. If the shadow is top and long, then the price will soon go down. If the shadow is lower and long, respectively, we can expect a price increase. If the body of the candle is small and the shadow is long, you can also expect a reversal. And very soon. There are cases that the market does not go in the direction in which it was assumed because of the length of the body, or the shadow. If this happens, then perhaps the opposite direction of the market.