When you start trading on Forex, the first thing that catches your eye is the charts, which are a visualization of the price flow, divided into intervals. There are several types of charts in our terminal that help the trader to better navigate the price volatility. One of the most popular and illustrative types of such charts are “Japanese candles”.
Japanese candles — a type of graphical analysis that shows the price history of a transaction using special bars.
It got its name because of the characteristic appearance of the bars, reminiscent of real Japanese candles — narrow rectangles. Due to their convenience, Japanese candles have become extremely popular and are used to build many graphical models in technical analysis. Candles show turning points in the market and price movement.
The fundamental points of a Japanese candle are:
Also, a Japanese candle consists of:
The body of the candle is a rectangle (bar), which indicates the period separating the opening price and the closing price. The body of the candle is either white or blacked out. It depends on the dynamics of quotes.
With the growth of quotations (growing candle), the body of the candle is colorless or white, the lower border of the body marks the opening price, the upper - the closing price. When quotes fall (falling candle), the body of the candle is black, and already the upper border of the body indicates the opening price, the lower - the closing price.
The shadow of the candle is a part of the Japanese candle, which indicates price lows and highs between the opening and closing of trading, which is an indication of the participants' uncertainty during the trading session.
The location of the shadows and their length indicate various situations in the market:
Assessing the size and location of bars and shadows, you can understand the market situation and make forecasts of its development.
stand out with their massive body, the opening price is distant from the closing price.
stand out with a very insignificant body.
is an extremely small body or the body is completely absent. Its usually connected to a situation where the opening price corresponds to the closing price and is a sign of turmoil in the market.
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