Forex Candlestick Patterns

Candlestick Patterns chart : formations and their use

First Basics

In the 18th Century the Japanese rice trader Homma Munehisa developed a graphical representation of the form of a quotation.
He noted that this type of listing price reflects not only the market sentiment, but also have a very good tool to predict future price movements.
These "candlesticks" were on a quick glance the opening price, the closing price, the maximum price the lowest price and the share price.

Second Definitions

The movement from opening to closing price is the real body (Jap "jittai").
The candle body of a falling candle or bearish candlestick (the closing price is below the opening price) is colored red. And a rising candle the candle body is colored with blue, if the closing price is above the opening price or bullish candlestick.

The lines above and below the real body are the upper and lower shadows (Japanese called "kage"), or upper wick (upper shadow) and lower wick (lower shadow)

A candle is complete without a shadow called Marabuzo:

forex candlestick patterns

Depending on the software chart, there are different sets of colors of the candle body. Thus, there are white and black, yellow and green or even red and blue as used real body. Do not get confused, it can be seen easily from the trend movements, what color a rising or falling price movement represents.

The following chart clearly shows the difference between the conventional graphical representation of the price performance of a song and the candlesticks. The advantages of the Candlestick pattern representation will quickly become clear.

Forex Candlestick Patterns

The advantage of the candlestick is due to the rapid progression in the teaching of the price - only a cursory glance is often enough to detect a trend - the other in their form in relation to the information content.

The Japanese candlestick chart analysis , has 80 pattern formations and they resulting consequences.

As a timing instrument is the candlestick is an excellent tool to determine the right time to enter and exit an trading, The hit rate for the correct estimation of the rate curve is between 60 - 70%.

Third Candlestick pattern formations

The following table shows an overview of the major Candlestick pattern formations.

Forex Candlestick Patterns

Forex Candlestick Patterns

Although candlesticks also work well in lower time window, they show their best explanatory power in the higher time frames (1 day, 1 week, ...)
There are "formations" of a candle. If this appearance, it makes sense to wait for a confirmation of the trend through the next candle before you act.

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