Japanese Candles Trading Strategy
An Introduction to Japanese Candles Trading Strategy
The Japanese candles trading strategy is among the many fundamental and key trading analysis that are used in majority of trading and Forex trading systems. The candles strategy is a basic chart that involves various key aspects and components that enables one to understand its flow and hence be able to derive information from it. It has its own unique methods and symbols that are used to represent information on it.
Features of Japanese candles trading strategy
The candles strategy uses the following key features that make it possible for the trader to be able to have a clear interpretation of the trend that it resembles.
- The real body enables the trader to identify the opening and closing price of a particular commodity. Here the trader is able to identify clearly whether the close is lower than the opening over a certain duration of time and also whether the close is on top of the opening. This makes it possible for the trader to get a clear picture of the general performance of the business.
- The shadow is a line that signifies an increase or a decrease in the price of a particular commodity that is being traded over a given period of time.
Patterns of Japanese candles trading strategy
The candles trading strategy mainly works on the basis of providing patterns that are interpreted by the trader in order to come up with a concrete conclusion regarding the market characteristics and behavior. These patterns include:
- Hammer pattern- It is mainly characterized by having a relatively small real body as compared to a wider and longer low shadow. It is interpreted by traders as being a negative drift in trading activities in the market.
- Engulfing pattern- In this pattern, the market performance is interpreted by the real body that engulf the performance of previous day’s performance.
- Dark-cloud cover- In this pattern, there is a resilient cloud cover on the market performance during the first day of trading.
- Hanging man – It resembles the hammer pattern with the difference being on the framework forming an uptrend pattern.
- Bearish pattern- In this pattern, a dark cloud usually forms on the previous day’s marketing trend.
- Piercing pattern- The pattern formed is usually a complete opposite of the dark-cloud pattern. It usually forms a down trend.
Each of the patterns used in the Japanese candles trading strategy is usually distinct. The trader can mix between any two patterns and see the outcome. A modification can be made in the patterns to ensure that one gets the best candle strategy to suit their business.