Learn to Apply Candlesticks on Forex Trading
For a beginner in the world of forex trading, befriend the graph because in technical analysis you can pay attention to the current price movements through the graph. How can you open a buy or sell position without knowing the market situation. Therefore, learning forex using technical analysis cannot be separated from reading charts or charts. In the trading platform Metatrader4 provides 3 kinds of charts, namely line charts, bar charts and candlestick charts. Maybe a line chart and bar chart are familiar to the general public, have you ever heard of candlestick charts? Why can it be named like that?
If you see the shape of the candlestick is like a candle, there is a candle rod as the body and the axis as a shadow. Here’s how to read it, Lower shadow shows the lowest price (low), upper shadow is the highest price (high), Open means the open and close prices are the close price. The white candle for the bull candle (price movement up) appears open below and a black candle for the bear candle is shown by open above.For time frames H1 (hourly) then one candle represents one trading hour. Many traders modify their colors to blue for bull and red to bear the goal to be more attractive. At the beginning of the discovery of candlesticks by Munehisa Homma from Japan in the 17th century was used in the trade of rice. However, until now candlestick is still very representative describing the market situation. So, for beginners who are still learning forex , they are also obliged to study candlesticks as a basis.
Forex strategy is closely related to the use of candlesticks, especially on candlestick patterns. From time to time the candlestick repeats itself so that it forms a pattern according to one of the Dow’s Theory bases ” History repeats itself “. Actually there are a lot of candlestick patterns, which might make you dizzy. Relax first, here are some patterns commonly used by traders, Single candlestick pattern, Dual candlestick pattern, and triple candlestick pattern which can be studied further on the Forexsignal30 education page
1. Analysis becomes easier
Traders will quickly find out who controls the market, whether bull or bear by looking at the color of the body candlestick. In addition, the length of the body candlestick also shows how dominant the bull or bear conditions are, if the body is short and the shadow is long indicating market uncertainty. This is different from the bar chart where we have to pay more attention to where the opening and closing price is at the bar.
Candlestick patterns are also easier to use when compared to price patterns such as head and shoulder, double top or double bottom.candlestick pattern mostly requires one to three bars to form and has clear rules so that it is easier for us to analyze it.
2. Indicators of a trend that changes rapidly.
Candlesticks help traders analyze market conditions so that they are very good at providing a signal of a rapid trend change. Forex strategies with candlesticks are very suitable for traders who are aggressive and quickly reactive to market changes. In fact, often the signals appear faster when compared to using indicators so that the candlestick is used as a reference for entries and exits.
3. Complementary Indicators in technical analysis
In the technical analysis the use of candlestick patterns can be used as a confirmation tool that is used together with several indicators. For example during a downtrend, then Morning star pattern is a signal of the end of the downtrend and the start will be bullish.
1. The many types of candlestick patterns
Because of the many types of candlesticks it is certainly difficult if you have to memorize all the candlestick patterns and even if it is not effective if we trade consider all the candlestick patterns. To overcome the problem of the number of candlestick patterns, we can focus on the main candlestick patterns that often appear namely marubozu, spinning top, doji, hammer, hanging man, inverted hammer, shooting star, engulfing, harami, pearcing line, dark cloud cover, tweezer , morning star, evening star, three white soldiers, three black crows.
2. Candlestick pattern is only suitable for short-term trading
Candlesticks provide guidance on which direction the market will move.But this guide is only for the short term, ie one to five or six bars ahead.
3. Candlestick does not provide a target.
Candlesticks only provide guidance on which direction the market will move. But candlesticks cannot provide a target indication of how far the market will move. Therefore candlesticks are more often used to determine the timing when to enter or exit.
There is no perfect forex strategy 100%, so candlesticks have advantages and disadvantages. However, the weaknesses in this candlestick does not mean making a candlestick cannot be used in the analysis. To overcome this is a forex trading strategy using candlesticks will be far more profitable if combined with other technical analysis indicators.
Congratulations on learning Forex .