Trading Psychology For Forex Trading

Candlesticks Charts: A Way To Represent Forex Market

Candlesticks charts are used to predict prices in the forex market. These are extremely easy to comprehend as well as much more visually appealing than other types of bar charts.

Candlesticks charts are one of the oldest types of charts being used to predict prices. They all started near the 1700s when Japanese Munehisa Homma became a celebrated rice trader who used to predict prices of rice with the help of candlesticks charts. In the modern world, the versatility and the dynamic features of the pattern of candlestick charts is exceedingly popular in the field of forex trading.

On all the charts, the users may toggle between bar, line and candlestick view of the chart. In comparison to the conventional charts, these candlestick charts are very colorful and visually appealing. Different colors signify different natures of movement in prices. The four prices, open, close, high and low, are of extreme importance for constructing a candlestick chart.

There are two parts of each candle: the shadows and the body. The body depicts the closing and the opening price for a certain period of time. If the body of the candle is black then the closing price will be below the opening, and if it is white, the closing will be higher than opening for that period. Alternatively, the shadows of the candlesticks signify the high and low in the intra-period of forex in the market.

The periods used in the method of candlestick charting are five minutes, fifteen minutes, one hour, every day and every week. Long shadows reflect that trading extended beyond enough the closing or opening price, while short shadows show that the trading had been confined to the closing or opening prices closely. Certain trends are predicted by each of the elements in candlestick pattern of forex.

A long white candlestick predicts strong pressure on the buyer. If the white candlestick is very long, it indicates that closing will be much more than the opening. This means that the prices will significantly advance from opening to the closing and the forex buyers are aggressive.

There are several candlesticks charts patterns that have been employed in the forex. For example, Doji is a pattern of candlesticks, which is generated whenever the body of candle is smallest which means that the opening and closing prices of the market are equal virtually.

Other patterns used in the system include the Hammer, Gravestone, Inverted Hammer, Three white soldiers, shooting star, Marubozu Black, white and the three black crows. These candlesticks have no lower or upper shadows and the low and high are symbolized by close or the open.

Candlesticks charts are visually much more appealing than the other 2-D bar charts that are used for forex prediction. These charts convey the information of market price in a much more easy and quick manner. Their remarkable success story has made them extremely acceptable and famous among the forex traders, in addition to that, they are quite easy to comprehend and understand.

All you have to do is to learn what the means of representing charts in forex are. Some of the major benefits of using candlesticks charts in forex are that they are easily readable, they can be used with other scientific indicators also and they provide earlier signals of reversal.

Ryan Litchfield is author of this article on Ryan Litchfield of BetterTrades. Find more information about www.ryanlitchfield.com">Ryan Litchfield of BetterTrades here.

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