What is a Japanese candle? How it relates in Forex trading


Japanese candles are a graphic representation of the financial market price in the form of candles. The Japanese Trading Candles are composed of a body and 2 wicks. Japanese candlestick patterns show and predict price variations. This analysis can be used for the Forex market, securities, commodities or crypto currencies.A candle chart is a financial chart used to describe the price movements of a currency, financial asset or derivative. With the ability to be used in several temporalities the candlestick chart represents four fundamental information data of the selected temporality, the opening price, the closing price, the maximum price and the minimum price.

How to understand Japanese candles?

Japanese candles provide different visual signals that facilitate the understanding of price action. The use of different units of time with the Japanese candlestick chart allows operators to better understand market confidence. The Japanese candle chart offers a greater depth of information than the traditional bar chart. With the bar graph, the ups and downs are emphasized more than anything else while the Japanese candles emphasize the relationship between opening and closing. In addition, when you combine them with other technical analysis tools, you must obtain an accurate estimate of the possible price movement in Avatrade review.

Patterns of Japanese candles

As you can see, when the closing price is higher than the opening price it produces a white candle (bullish). While a closing price lower than the opening price of the candle produces a black candle (bearish). The body is formed by the action of price. The daily extreme movements of the prices are represented by the lines that extend from the body that are called shade. Sometimes, in a more colloquial language the smaller wicks are called nose. If the closing price is very similar to the opening price or matches it, the candle that forms is called Doji. Actually, memorizing the names of the different Japanese candlesticks and their descriptions based on their training through price action is not a requirement to achieve success in trading. However, it is a very useful tool for those traders that follow the movement of prices.

Conclusion: how it helps you?

To understand the candle chart one must know that they represent the price movements, although they are not composed of a simple line but of individual candles. Forex traders prefer reading candle charts due to the fact that they include considerably more information than the line chart and can be much more useful when making prudent trading decisions. A line chart is not complex and shows price movements on a line while candle charts present more information within each individual candle.With a simple glance at the Japanese candles, it is possible to see the momentum or impulse, the direction, observe if there is buying or selling pressure and in general the market bias.