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Candlestick charts were invented in Japan 100 years before Western countries developed bar and point-and-figure charts. In the 1700s, a Japanese man named Homa discovered the price of rice when markets were strongly influenced by demand and supply and the emotions of traders.
Candlestick charts were invented in Japan 100 years before Western countries developed bar and point-and-figure charts. In the 1700s, a Japanese man named Homa discovered the price of rice when markets were strongly influenced by demand and supply and the emotions of traders.
The candlestick chart shows that sentiment by visually representing the shape of the price movement through different colors. Traders use candlesticks to make trading decisions based on irregularly occurring patterns that help predict the short-term direction of prices.
A candlestick is like a bar chart, it displays the open, high, low and close prices of the market for a day. A wider part of the candlestick is called the "real body".
The function of this real body is to show the price range between the opening and closing of that day's trading. When the original body is filled with black or red color it means that the close was lower than the open. If the original body is white or green in color, it means that the closure was more than the opening.
Traders can change the colors of their indicators on the trading platform. Traders can choose platforms with any combination of candlesticks of opposite colors, such as green and red. There are many platforms where you can choose the color you want to use.
The vertical lines that appear just above and below the real body are called shadows and are sometimes referred to as wicks.
The high and low prices of that day's trading are indicated by the shadows. If the upper shadow of a down candle is short, it means that the day's open was close to the day's high.
A small upper shadow on an up day indicates that the closing high was near. The relationship between open, high, low and close days is determined by the daily candlestick size. The actual body can be tall or short and black or white, and the shadow can be long or short.
Bar charts and candlestick charts show the same information in different ways. Candlestick charts are easier to see due to the color coding and thick real body of the price bars. For some traders, highlighting prices in this way makes it easier to distinguish between open and close.
Bar charts also show data for the same exchange-traded fund (ETF) over the same period. A bar chart uses colored bars, whereas a candlestick chart uses colored candles. Many people like to see the clean look of the bar chart while some people like to see the actual body thickness.
Candlesticks are formed because of the up and down movement of the price. While these price movements are sometimes random, they often form patterns that traders use for trading purposes or analysis.
Candlestick patterns are basically divided into two categories: bullish and bearish. Through bullish pattern we understand that the price is likely to rise, and bearish pattern. Through this we get an indication of the possibility of a price drop. But all these patterns do not always work accurately, because the candlestick pattern only highlights the trend of the price movement, and cannot give a hundred percent guarantee.
A bearish engulfing pattern develops into an uptrend when sellers outnumber buyers. This process is reflected by a long red or black real body enclosing a short green or white real body. The pattern indicates that sellers have outnumbered buyers so the price may continue to decline.
A bullish engulfing pattern occurs when buyers outnumber sellers. This is reflected on the chart by a long white or green real body surrounding a short black or red real body. As the number of buyers is more, the price is likely to increase.
In the evening they are a topping pattern. It is marked by the last candle opening the pattern below the previous day's short real body. Small real bodies can be red-green or white-black. Two days ago the last candle faded deep into the original body of the candle. Sellers take control after the pattern shows buyers stall. The number of more sellers may increase. The morning star is the opposite of the evening star.
A Bearish Harami is a candlestick chart pattern used in technical analysis to indicate a potential reversal of an upward trend in the market. It consists of two candles:
1. The first candle is a large bullish (upward) candle, showing strong buying activity.
2. The second candle is a smaller bearish (downward) candle that fits within the body of the first candle, signaling weakening momentum.
The pattern suggests that the bullish trend is losing strength and a bearish reversal may occur. Traders often interpret the Bearish Harami as a signal to watch for a possible downturn in price.
A Bullish Harami is a candlestick chart pattern that signals a potential reversal of a downward trend in the market. It consists of two candles:
1. The first candle is a large bearish (downward) candle, indicating strong selling activity.
2. The second candle is a smaller bullish (upward) candle that fits within the body of the first, suggesting that selling pressure is weakening.
This pattern indicates that the downward trend may be losing momentum, and a bullish reversal could follow, making it a potential buying signal for traders.
A bearish Harami cross is an up candle followed by a doji and occurs in an uptrend, in which the candlestick has virtually equal open and close during the session. The original part of the previous session consists of a doji and has the same effect as a bearish harem.
A bullish Harami cross occurs in a downtrend where a down candle follows a doji. The original part of the previous session contains the doji. Its effect is similar to that of Bullish Harami.
When this pattern begins it is called a "long white day". Then, in the second, third and fourth trading sessions, the small real firms lower the price, but they are still within the range of the price of the long white day ie the first day of the pattern. Another long white day on the fifth and final day of the pattern.
Although the pattern shows us that prices have been declining for three consecutive days, a new low is not in sight, and bull traders are ready for the next move.
After the first long up day, the second day's gap increases slightly, but this pattern differs slightly. Everything else remains the same except for some differences in this pattern. When this reversal occurs, it is called a "bullish matte hold."
This pattern starts with a strong down day. This is followed by three smaller real bodies that make upward progress but remain within the range of the first major down day. The pattern is complete when the fifth day takes another big downward move. This means that the number of sellers has increased and the price may decrease.
As Japanese rice traders discovered centuries ago, traders' emotions have a major impact on that asset's movement. Candlesticks help traders gauge the emotions behind asset price movements, and provide guidance on specific patterns as to where asset prices are likely to go.
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