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Japanese Indices Candlesticks Patterns Explained - Japanese Indices Trading Candlesticks Patterns Technical Analysis - How to Use Japanese Candlesticks in Indices Trading

Understanding Candlesticks in Indices Trading - How to Read Candlesticks in Indices Trading - Japanese Indices Trading Candlestick Patterns PDF

Brief History

Candlesticks were developed in the 18th century by the legendary rice trader called Homma Munehisa to give an overview of opening, high, low and closing market indices price over a given period of time.


They were used by the legendary rice trader to predict future market indices prices. After dominating the rice market, Munehisa eventually moved to the Tokyo exchanges where he gained a huge fortune using this analysis. He is said to have made over 100 consecutive winning trades.


Types of Indices charts

There are 3 types of charts used in Indices: Line, bar and candlesticks .


Line - plots a continuous line connecting closing indices prices of a indices trading instrument.

Line Indices Trading Chart in Indices Trading



Bars- displayed as sequence of OHCL bars. In indices trading, OHCL represents OPEN HIGH LOW & CLOSE. The Opening indices price is displayed as a horizontal dash on the left and closing indices price as a horizontal dash on the right.

Bar Indices Trading Chart in Indices Trading



The main disadvantage of a bars is that it is not visually appealing, therefore most indices traders don't use them.


Candlesticks - these use the same indices price data as bar indices trading charts (open, high, low, and close). However, they in a much more visually identifiable way which resembles a candle with wicks on both ends.


How to Interpret

The rectangle part is called the body.

The high and low are described as shadows and drawn as poking lines.

Trading Indices Candlesticks Indices Trading Chart Patterns


The color is either blue or red

  • (Blue or Green Color) - Indices Prices moved up
  • (Red Color) - Indices Prices moved down


Most trading platforms like the MT4, use colors to mark the direction. colors used are blue or green; when indices price moves up, red; when indices price moves down.


Indices Candlestick Vs. Bar Indices Trading Charts

Candlesticks Vs. Bars


When candlesticks are used it is very easy to see if the indices price moved up or down as opposed to when a bars are used.


The Japanese techniques also have very many formations that are used to trade the Indices Trading market. These patterns have different technical analysis interpretation and the most common are:

Marubozu Indices Trading Candlestick Pattern and Doji Indices Trading Candlestick Pattern
Spinning Tops
Reversal Patterns
Inverted Hammer Indices Trading Candlestick Pattern and Shooting Star Indices Trading Candlestick Pattern
Piercing Line Indices Trading Candlestick Pattern and Dark Cloud Cover Indices Trading Candlestick Pattern
Morning Star Candlesticks and Evening Star Candlesticks


The above patterns is what makes the Japanese candlesticks popular among technical traders and it is why this type of analysis are the most widely used when it comes to analyzing the indices trading market. The analysis for these pattern formations in Indices trading is the same as that one used in stocks trading.


Drawing These Charts on MT4 Indices Trading Platform

To draw these on the MT4, select the charts drawing tools within the "MT4 Toolbar" - shown below.


MT4 Line, Bar, Candlestick Indices Trading Chart Drawing Tool Bar


To view this toolbar on MT4 go to "View" Next to file at the top left corner of the MT4 Platform, Click "View", Then Click "Toolbars", Then check the "Charts" Button. The above toolbar will appear.


Once the above toolbar, appears you can then select the type you want to convert to, If you want to view using the bar format, click the bar tool button as shown above, for line format click the line tool button, for Japanese candlesticks format click the "candlesticks tool button".


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