Japanese candlestick charts are the most popular charts for Forex traders, and for good reason: they provide very complete, secure and accurate information about market developments.
Let’s see the structure of these candles.
The Wicks or Shadows (tail and nose):
Note: It is possible to choose your preferred color choice in the parameters of the trading platform.
The Japanese candlestick chart represents the difference between the opening and closing of the market using two colors, to facilitate its interpretation:
Do you want to learn more about technical analysis using Japanese candles? We recommend that you read our our article: What are Japanese Forex Candles – The Candlesticks explained . You will learn all the candle patterns that exist and what each one implies, accompanied by graphic examples.
As mentioned above, candles have the function of presenting the price action in a given unit of time. In addition, they can provide useful information, such as market sentiment or possible trend reversals through specific numbers. Understanding this is a great start to using candles in trading.
When trading, especially in Forex, you will analyze price charts to observe market movements. If we compare the line graphs and the candle graphs, there are very obvious differences.
The line chart is a very simple method to show the price movement. Displays information on a single line using a series of dots. This is the type of chart that you may be used to seeing in different magazines and newspapers, showing the market sentiment and the trend of an asset.
To understand candlestick charts, you need to know what price movement is, not just in a row, but in a series of candlesticks.
Forex traders prefer candlestick charts because they show much more information than a line chart and can be much more useful in making informed trading decisions.
Candlestick charts are used across multiple time units. In particular, if we display a candlestick chart over a period of 30 minutes, each candle will take 30 minutes to form. Likewise, if the chart is set for a 15 minute time frame, the formation of a candle will last for 15 minutes.
Imagine that we have two charts showing the EUR / USD pair price action if we consider a half hour interval:
Source: Demo Account – MetaTrader 5 Supreme Edition – comparison of EURUSD M5 and M30. Held on January 14, 2020 – Please note that past performance is not a reliable indicator of future results.