Basic Japanese Candlestick Patterns
Patterns naturally emerge in the course of trading Forex. It is part of how the market operates, and you are wise to take note of the movements that come up regularly as you might notice some trends that occur when they do.
In today’s piece, we want to specifically look at how some basic Japanese candlestick patterns might prove useful to you when you attempt to identify the outcomes that are likely to emerge when those patterns show up.
Basic Japanese Candlestick Patterns
Spinning Tops
This fun-looking pattern is when the candlestick appears to have two wicks coming out of either side of it that are approximately the same height. What it means from a trading perspective is that the price movement on that currency during that time period was somewhat indecisive.
The pair moved up for a while, down for a while, and ultimately settled near the middle of the range. Traders tend to look at this type of pattern in the candlesticks as being indicative of a lack of clarity in that pair at this time.
It means that more information may be necessary before one can make a reasonably intelligent assessment of where the currency pair is headed next.
Basic Japanese Candlestick Patterns
Marubozu
Keep in mind that some of these names come from different cultures, and that makes them somewhat challenging for native English speakers to completely understand sometimes. The good news is that you have this friendly cheat sheet to help you determine what these patterns mean.
The Marubozu pattern is noted by the fact that there is almost no wick at all to these candles. They show movement in the pair, but only within a very limited range.
The open and the close prices were the highest and lowest prices for that pair at the close of the candle.
There was no significant movement beyond the open and the close.
If the open price is the low price, and the close price is the high price, then this candle is very bullish for the future of the currency.
If the open price is the high price, and the close is the low price, that is very bearish for the pair.
You might want to jump into a trade that follows this trend as soon as you see one of these candles.
Basic Japanese Candlestick Patterns
Doji
This type of candle has the exact same open and close price, or very close to it.
It means that there may have been movement in the currency during that time period, but it opened and closed at the same price regardless.
This type of candle most commonly shows up on a short timeframe chart, and they don’t necessarily indicate which way the market is moving.
These candlesticks simply show up when the price happens to land in the exact same spot on the open and the close. They are rare, and you might want to discount them somewhat as they are not necessarily used to determine the next likely outcome for the currency pair.
Basic Japanese Candlestick Patterns
All candlesticks have a unique shape and size, but some show up more commonly than others. You can use the design of these candlesticks to try to work out what might happen next with the currency pairs you are trading, but also remember that surprises do happen in the market all the time.
You shouldn’t put too much faith in your ability to read the shape of candlesticks when other indicators are pointing another way. You need to look at those candlesticks and at other indicators as a way to confirm the movement before you act.
It is always possible that one candlestick just happens to look a certain way without much meaning attributed to it.
It is better to wait until you can confirm that the currency is still moving the way that you suspect it is before taking a position in it.
With all of this in mind, perhaps now you can better trade in the markets with a more informed knowledge of what the various candlesticks mean, and why they are so important. Just be aware of how these moves impact the markets and you should be in good shape. Look for interesting candles and study them from times gone by to see if you can figure out the mystery yourself.
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