| Candlestick Charts For FX Traders |
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| Written by Tom OReilly |
| Wednesday, 17 June 2009 14:14 |
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Among the many types of technical analysis available to currency traders, the most popular and the single most useful are undoubtedly candlestick charts. During the 18th. century, they were originally developed in Japan by a prominent trader of commodities who used them to chart the fluctuating price of rice. To this day they are often called Japanese candlestick charts, for this reason. In fact, many of the patterns that they form have Japanese names.
Among the many types of technical analysis available to currency traders, the most popular and the single most useful are undoubtedly candlestick charts. During the 18th. century, they were originally developed in Japan by a prominent trader of commodities who used them to chart the fluctuating price of rice. To this day they are often called Japanese candlestick charts, for this reason. In fact, many of the patterns that they form have Japanese names. Traders were in need of something more than the simple line graphs plotting the price of a commodity at regular intervals in time, that had been used for centuries. They wanted something that could plot more variables within a two dimensional graph. Candlestick charts were even better than the bar chart showing the opening, high, low and closing prices of a commodity that were used to help traders predict future price movements and were reliable but not as good as the candlestick charts. Charles Dow, founder of the Wall Street Journal and co-founder of the Dow Jones company, introduced them to the American Stock Market at the beginning of the 20th. century. From there they were adapted by the worldwide financial markets. Candlestick Formation The chart is made up of a series of 'candlesticks' which typically have a chunky body with vertical lines stretching up from the top (the upper shadow or wick) and bottom (the lower shadow or wick). The different points measure the differential in prices over a certain period of time, which might be 5 minutes, 15 minutes or longer. The top and bottom of the body are the opening and closing prices. The top of the wick is the highest point reached during the time period and the lowest point of the lower wick is the low. The bottom of the body marks the opening price and its top marks the close. If the price fell during the period the prices are the other way around and to show this at a glance the body will be black (or red if colored). If price rose during the period the body will be white (or green or blue if colored). How To Use Candlestick Charts In Forex Trading A forex trader can base a system for determining when a trend is developing on the many patterns that develop on the charts showing 5 or 15 minute candles over a period of several hours. For example, when the candle body is green or white and higher than the preceding candles, it indicates that buyers are very bullish. When it is red or black and lower than the preceding candles, it indicates that buyers are very bearish. In the fast moving forex markets where trading decisions often need to be made in a split second, being able to see these implications at a glance is vital. So for any forex trader, candlestick charts are one of the most useful visual aids. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Get free advice, help and tutorialsonDay Trading The Currency Marketclick us at http://daytradingthecurrencymarket.com You can get a unique content version of this article from the Uber Article Directory. |
| Last Updated on Tuesday, 23 June 2009 10:16 |