Types of candlesticks in Forex trading

Posted by on Nov 14, 2012

By Fabiano Trevisiol


Various types of candlesticks in forex trading

 

Given that the chart is the most used to make trading in forex with Japanese candlestick. There are other 2 types of chart , the barcode and a single line, but the one used in the vast majority of cases is the Japanese candlestick chart. Why? Because it sums up more information in less space and this makes it absolutely the best. The history of this type of chart dates back to hundreds of years ago in Japan, were the name it come from , was used to show the trend of the price of rice.

There are various types of candlesticks, depending on the body shape and shadow each Candle may have a particular name.

First of all, we see the structure and the information that a japanese candlestick is able to give us, this kind of information thatcan help us in our daily activity of trading.

Each candlestick on the chart refers to the interval time frame of reference, for example if we selected as 5 minute time frame, candle will provide the information representing the movement of the price every 5 minutes interval, each candlestick will represent 5 minutes then. As always it is the rule that the higher the time frame, more reliable is the chart .

The information that a candlestick represents in a forex chart:

  • Opening price

  • Closing price

  • Highest price

  • Lowest price

The first candle that we see in the example below, it is a normal bullish candle, while the second candle, red, is a bearish candle.

Apart from the colour of the body we reflected bullish or bearish type the position of the closing price compared with that of opening.

If the closing price is below the opening, the candle is bearish, if the closing price is above the opening the candle is bullish.

The shadow represents the high and low of the price had riched in that time frame. The shadow is very important because more is pronounced more highlights particular indecision or reaction against an important level. This is very useful when trading in forex markets. Less shadow instead tells us that the price has always followed a decisive direction throughout the period .

japanese candlesticks

 

Types of Japanese candlesticks

 

Japanese candlesticks marubozu

The peculiarity of this type of Japanese candle is the absence of shadows both below on top.

This candle is telling us that the market for the entire time frame of reference has moved almost exclusively in the same direction, and then the ongoing trend is very decided. Watching a forex currency pairs and being confronted with this type of candle that means we can do trading in favor of the trend.

marubozu candle

 

Japanese candlesticks doji

The doji is a Japanese candle without body or almost without body, where then the opening price and the closing price are equivalent, has the appearance of a cross.

Indicates particular indecision, there are various types of doji classified depending on the position of the cross, which expresses greater indecision is the doji line.

 

Example of long leggend

 

Other types of  doji

doji candle

 

Japanese candlesticks hammer e hanging man

This type of candle in forex trading indicates a possible trend reversal, in this case, the color of the body is unimportant, rather you must figuring out if we find ourselves faced with a hammer or a hanging man. The hammer is located at the bottom of a trend and the hanging man at the top of the trend, in both cases the indication is that the trend is about to reverse.

hanging man

Example on chart

hammer

 

The candles that represent the opposite of the two mentioned above are the inverted hammer and shooting star, are made the same, only changes the position on the chart.

hammer candle

 

Besides this article you might be interested in my previous lesson dedicated to the main trading signals on graphs based on technical analysis with candles: pin bar, engulfing pattern, inside bar.

 

For this lesson is all about, thanks for your attention and I wish you a good continuation even with your trading!

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