Questions: Why are 99% of traders trading via Japanese candlestick charts? What and why is this kind of candlestick used by many traders?
Answers: Based on the candlestick charts, you will be able to analyze price behavior. From there, you can also predict the next trend of prices and make the most accurate trading decisions.
And this article will probably be the most detailed article, summarizing all the most important knowledge about Japanese candlestick.
What is the Japanese candlestick?
Japanese candlestick (aka Candlestick, candle) is a pattern that shows the whole price movement in a given period of time. There are two basic colors Green and Red determining the direction of the price. Green = bullish candlestick = up price. Conversely, red = bearish candle = down price.
(A) The price is up within 5 minutes => (B) Creating 1 green candlestick within a period of 5 minutes => (C) One 5-minute candlestick = Five 1-minute candlesticks.
(A) The price is down within 5 minutes => (B) Creating 1 red candlestick within a period of 5 minutes => (C) One 5-minute candlestick = Five 1-minute candlesticks.
So the Japanese candlestick chart consists of consecutive candles. Depending on the time frame (1 minute, 5 minutes, 30 minutes, 1 hour, etc.), there will be different candlestick charts.
For example, when traders use the “1-minute candlestick chart” => It means: They are using the Japanese candle chart with the 1-minute time frame (the candlestick time period is 1 minute).
“5-minute candlestick chart” => Japanese candle chart with the 5-minute time frame (the candlestick time period is 5 minutes).
The main elements of Japanese candlestick
The Japanese candle consists of 2 main elements: Body and shadow. And it is made up of 4 characteristics of the price: Opening price, closing price, highest price, and lowest price.
Up price: Opening and closing prices create the body of the green candle. Upper shadow = highest price, lower shadow = lowest price.
Similarly, down price: The body of the candlestick is red.
Stable price: Neutral and colorless candlestick (without body). Long shadow, upper shadow = highest price, lower shadow = lowest price.
The most important meaning of Japanese candlestick
The reasons Jap candlestick and Jap candlestick patterns are used by 99% of traders are because they can analyze and predict price behavior in the market.
(A) This is a bullish candle (green) with a candlestick time period of 30 minutes.
(B) It consists of 3 bullish candles (green) with a 10-minute candlestick time period.
(C) Behavior: The price continuously increased over a period of 30 minutes.
=> Prediction: The price trend would continue to increase in the near future.
(A) This is a special candlestick (small upper body, long shadow) with a candlestick time period of 30 minutes.
(B) It consists of 3 10-minute candlesticks.
(C) Behavior: The price dropped in the first 10 minutes, but then stopped (balanced) and rebounded sharply in the last 10 minutes
=> Prediction: The price tends to continue to increase in the near future.
(A) A special 30-minute candlestick (closing price = opening price).
(B) It consists of 3 continuously up and down 10-minute candlesticks.
(C) Behavior: The price went up and down continuously, but after 30 minutes it returned to the initial price (Opening price = closing price).
=> Prediction: The price would have strong fluctuations in the future. Focus on observation and prepare for transactions.
In transactions, correct analysis => Correct predictions. Only with a correct prediction, you may be able to open profitable orders. The money will go straight to your pocket when you enter correct transactions. So, Japanese candlestick and Japanese candlestick charts are the tools for you to make the correct analysis.
The longer the time frames are, the clearer meaning the Japanese candles provide. At the same time, the abilities to analyze and predict are also more accurate. For example, A 5-minute candlestick chart will give better results than a 1-minute candlestick chart.
Thank you for reading the article on what the Japanese candle is. There are many other articles that go into detail about the Japanese candlesticks and candlestick patterns that Howtotrade Blog will update in the near future. See you in the following articles.