Japanese Candlesticks
Japanese Candlesticks Analysis is a form of technical analysis developed in the 1700s that lets trader visually see if bulls or bears are in control of a market.
Explanation
- Candlesticks are a visual way to look at price data
- Two Components to Japanese Candlesticks
- Solid filled in section (bodies) - defined by the open and close price for the time period in qustion
- Vertical black lines (shadows) - mark the intraperiod high and low
Popular Candlestick Patterns
- Engulfing Pattern:
- When the body of a candle engulfs (higher top and lower low) the entire boy of the previous candle
- Suggests that the market should move in the same direction for the next 3-5 periods
- Bullish Engulfing if price is up on the period
- Bearish Engulfing is price is down on the period
- Dark Cloud Cover:
• Failed Bullish/Bearish Engulfing
• Dark Cloud cover/Piercing Pattern
• Morning Star/Evening star
• Three Inside Up/Three Inside Down
• Three White Soldiers/Three Black Crows
• Rising/Falling Three Methods
• Bullish/Bearish Engulfing Shadow
Japanese Candlesticks Combined With Elliot Waves
- Focus on bullish candlestick patterms in an up-trending market
- Focus on bearish candlestick patterns in a bearish market
History of Japanese Candlestick Analysis
- Has been around for hundreds of years
- First used by Japanese rice traders in the 1700s
- Munehisa Homma is credited for creating them