How to Use Japanese Candles in Indices Trading
How to Read Candles in Indices - Japanese Stock Candle-stick Setups TutorialBrief History
Candles were created in the 18th century by the legendary rice trader called Homma Munehisa to give an overview of the opening, high, low and closing market price over a specified period of time.
They were used by legendary rice trader to predict future market market prices. After he dominated the rice market, Munehisa eventually moved to the Tokyo exchanges where he gained a huge trading fortune using this trading analysis. He is said to have made over a hundred consecutive winning trades.
Types of charts
There are Three types of charts used in Indices: Line, bar and candles.
Line - plots a continuous line connecting closing prices of indices.
Bars- displayed as sequence of OHCL bars. OHCL represents OPEN HIGH LOW and CLOSE. Opening price is illustrated as a horizontal dash to the left and the closing price as a horizontal dash to the right.
The main disadvantage of a bars is that it is not visually appealing, therefore most traders don't use them.
Candlesticks - these use the same price information as bar charts (open, high, low, & close). However, they are displayed in a much more easily identifiable way that looks like a candle with wicks on both its ends.
How to Interpret
The rectangle section is known as body.
The high & low are referered to as shadows and drawn as poking lines.
The colour is either blue or red
- (Blue or Green Color) - Prices moved up
- (Red Color) - Prices went down
Most platforms like the MT4, use colors to mark direction. Color used are blue or green: when price moves up, red: when the price moves down.
Candles Vs. Bar Chart
When candlesticks are used it's very easy to see if the market price headed up or down as opposed to when bars are used.
The Japanese strategies also have very many formations which are used by technical analysts to trade the market. These patterns have different trading analysis explanation & the most common are:
The above patterns is what makes the Japanese candlesticks popular among technical traders and it is why this type of analysis are most often utilized in analyzing the trading market. The analysis for these pattern setup formations in trade is the same as that one used in stock trading.
Drawing These Charts in Meta Trader 4
To draw these on the MetaTrader 4, choose the trading charts drawing tools within the "MT4 Tool-Bar" - shown below.
To view this tool-bar in MetaTrader 4 navigate to the "View" Next to file on top-left corner of the MetaTrader 4 Software, Click "View", Then Click "ToolBars", Then check the "Charts" Button. The above tool-bar will appear.
Once the above toolbar, pops up you can then choose the type you as the trader want to convert to, If you as a trader want to view using the bar chart 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".
Get More Topics and Tutorials:
- How to Add Accumulation Distribution Technical Indicator on Stock Indices Chart
- How Can I Draw Stock Index Trend Lines Bounce Analysis?
- How Can I Trade GER 30 Trading Strategy?
- How to Trade Using MetaTrader 4 Demo Account
- How to Trade SMI in MT4 Platform
