Japanese candles: how to work with the schedule
Japanese candles - this is a way to display prices on the chart for a certain period of time (timeframe). Most traders use this method, because it gives more useful information for decision making, compared to other methods.
The main element of this chart is a candle. It can be white or green (bullish / upward) if the quotes grow up. If the candle is black or red (bearish / descending) - quotes are reduced.
Visually the graph is similar to the sequence of candles, different sizes and shapes.
Depending on the time interval you use to view the graph, a different number of candles will be displayed. If you set the schedule for a five-minute period, the new candles will appear on the chart every 5 minutes. If the period lasts 1 hour - a candle will be formed 1 hour.
Each candle has a body and a shadow (wick).
The body of the candle has a lower and upper bound. The lower limit of the growing candle shows the level at which the period opened. Top - the level of the period's closing. The incident candle has the opposite: the upper limit is the opening level of the period, and the lower one is the closing level.
Shadows of the candle show the maximum price changes for the selected timeframe.
Combinations of candles
The combination of Japanese candles helps to decide whether the trend to be continued or reverse, depending on the candles pattern.
The combination of "Doji" has several options and they are all easy to see on the chart. Dodge appears in cases where the price opens and closes at the same level. The body of the candle is missing. The shadow of the candle shows how the price change from minimum to maximum took place in the timeframe. In the event that both the body and the shadow of the candle are missing, this means that the price was not changed for the timeframe indicated.
The Doji candle has a reversal character when it appears after a long trend.
“Top" is characterized by the presence of a small body of a candle and longer shadows on both sides, almost the same length. "Top" can be either a bullish (green candle) or bear (red candle).
Such candles are obtained due to the persistent confrontation between sellers and buyers, during which none of them can receive a significant advantage. If such a candle is located after a bullish trend, this may indicate uncertainty on the part of buyers or the increased interest from sellers. The "Top" candle can act as a sign of a trend reversal.
There are no shadows on the Marubozu candles. The candle characterizes the continuation of the current trend and can be both bullish and bearish.
Hammer and Hanged Man
These candles have a small body, a short upper shadow and a long lower shadow.
The hammer symbolizes the reversal of the bearish trend and Hanged Man symbolizes the reversal of the bullish trend.
Inverted Hammer and Falling Star
Candles have a small body, a short lower shadow and a long upper shadow. The Inverted Hammer indicates a reversal of the downtrend, and the Falling Star indicates a reversal of the uptrend.
Candle Yo Sen
Bull candle with a large body and short or missing shadows. Characterizes an uptrend.
Candle Yin Sen
Bear candle with a large body and short or missing shadows. Characterizes a downtrend.
Bullish engulfing and Bearish engulfing
Engulfing is a combination of two candles. "Bullish engulfing" - the second candle (ascending) is greater than the previous (descending). The combination indicates a reversal of the downtrend. In the case of Bearish Engulfing, the situation is completely opposite.
The bottom of the tweezers and the top of the tweezers
The bottom of the tweezers consists of a bearish candle and a bullish candle. Both candles have a body and a lower shadow, but there is no upper shadow. The combination indicates a change in the trend from bullish to bearish.
The top of the tweezers is opposite to the combination of "The bottom of tweezers" and indicates a reversal of the bearish trend.
Morning Star and Evening Star
The evening star consists of three candles:
1) Bullish candle with large body and small shadows on both sides
2) Bullish candle with a small body and small shadows on both sides (the smaller the body, the more reliable the figure).
3) Bearish candle with a large body. Should close lower than the middle of the first candle.
The combination "Evening Star assume a sharp change in the mood of the market, which confirms the long bearish candle. The market is taking a downward trend.
In case the average candle is a candle "Dodge", the combination is called "Evening Star of the Doji". This combination is the most reliable of all variations of the figures.
The morning star is a reflection of the evening star and symbolizes an upward trend.
Three bull soldiers and three bear soldiers
Three bull soldiers consist of three rising candles:
The first candle is small in size, has a small body and a small upper shadow.
The second candle is several times larger than the first with a very small lower shadow. The upper shadow is absent.
The third candle is several times larger than the second candle with a very small lower shadow.
Three bull soldiers finish the bearish trend and symbolize the beginning of a new uptrend.
Three bear soldiers - a combination of three descending candles.
The first candle is small in size, has a small body and a small lower shadow.
The second candle is several times larger than the first with a very small upper shadow. The lower shadow is absent.
The third candle is several times larger than the second candle with a very small upper shadow.
Three bear soldiers indicate the beginning of the bearish trend.
Conclusion: "Japanese candles" allow you to see at once 4 price marks for the timeframe (opening price, closing price, maximum price and minimum price). The correct interpretation of the combinations will help you determine the direction of the trend and make the right decision. "Japanese candles" - a clear and informative way of displaying prices on the chart, which gives a lot of useful information for making the right decisions.