Understanding Japanese Candlestick Patterns

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Understanding Japanese Candlestick Patterns

What is forex trading Japanese Candlestick Patterns?
More than 200 years ago, the rice businessmen in Japan used a technical analysis in the form of candlestick chart to analyze the demand and the offer price of rice. Candlestick chart is then developed and widely used in all around the world. This candlestick chart now is called Japanese Candlestick Patterns.

Forex Trading Candlestick Charts are price movement charts consist of open high, low and close price.

If the closing price is higher than the opening, the candlestick is displayed transparent or without color.
If the closing price is lower than the opening, the candlestick is displayed in black color.
The transparent or black colored part is called body or real body.
The vertical line coming out from the body is called shadow or tail which is representing the highest and the lowest price movements.
The highest price is theup-most of tail, and the lowest price is the below of tail.

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Japanese Candlestick Patterns : Long Versus Short Bodies

The longer body is indicating a greater price movement. An active market or a market with a huge volume can be seen from the length of the body in a bar, and vice versa.

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The longer body with white color in a candlestick chart shows a greater buying pressure (the price is increasing). The longer body is showing the bigger difference between the opening and closing prices, in which the opening is much lower than the closing price. It is called as Bullish.

The longer body with black color in a candlestick chart shows a greater selling pressure. The longer body is showing the bigger difference between the opening and closing prices, in which the opening is much higher than the closing price. It is called as Bearish.

Japanese Candlestick Patterns: Long Versus Short Tails

The upper and lower shadows in candlestick charts contains important information about transaction characteristic.

A candlestick with shorter tail is showing an offering price which is around the opening and closing price.

A candlestick with longer tail is showing that the offering price is much above or below the opening and closing price.

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Picture 1
Candlestick with the upper tail longer than the below tail indicates an increasing buying pressure. It can be seen from the offering price which is much higher the opening and closing prices, so that the buyers are more dominant. But eventually, the seller can pull the price to the lower position.

Picture 2
Candlestick with the below tail longer than the upper tail indicates an increasing selling pressure. It can be seen from the low offering price, so that the sellers are more dominant. But eventually, the buyer can pull up the price to a higher position.

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