Forex Candlestick Chart Patterns – Introduction
Our previous article discussed three types of charts on MT4: line chart, bar chart and candlestick. For this article we will discuss more about candlestick because this type of graph is more popularly used.
Based on the history of its emergence, candlestick chart types began to be known around the 1850s. Candlestick chart development is done by a rice commodity trader from Japan, Homma, and continues to grow for years to the candlestick system we use today.
Candlestick is formed from open price, high, low and close. The box formed between the open and close prices is the real body candle. The thin line above and below the candlestick body we call the shadow. Shadow formation above body candle culminate in high level while shadow formation under body candle culminate in low level. Open price is smaller than the close price formed a bullish price chart and on the contrary the open price is greater than the close price formed a bearish price chart.
As the price moves, the candlestick shape is not monotonous as in the picture. Sometimes a long upper shadow is formed with a small real body and a short lower shadow. There are many other forms. We can analyze the relationship of each OHLC price formed because the real body is considered to have important information to be considered analysis. Each candlestick form provides specific information and effects of different price movements. So this is what triggers the continued development of candlestick analysis.
As we know the price movement in a certain period is a power struggle between the Buyer and Seller. Correct? One bearish candle we can interpret as a seller’s power is greater than the buyer. Vice versa.
The most basic form we can see from real body. Big or Small?
The large bullish body candle gives the sense that there are many buyer powers in the market at that time period.
The large bearish body candle gives the sense that there are a lot of power sellers in the market during that time period.
While the small body candle gives the sense that not much power is in the market in that period.