An Insight On Forex Chart Analysis With Candlesticks

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Forex Chart Analysis With Candlesticks

The candlesticks chart analysis first appearance sometime around late eighteenth century.

The main credit for chart analysis with candlesticks and its development goes to a legendary rice trader named Homma, who lived in Sakata. Most likely, it is his innovative ideas that were developed and modified over many years of trading, which resulted in the present system of analyzing charts with candlesticks.

For forex chart analysis with candlesticks, one has to develop a candlestick chart in the first place. In order to do this , one must have a data set about the open, high, low and close values for each time frame, that he wants to display. The filled portion of the candlestick is called "the body" while the long thin lines above and below the body are called "shadows". The high is made clear by the top of the upper shadow and the low by the bottom of the lower shadow

For example, if the stock closes far above the opening price, you will see a hollow candlestick drawn with the bottom of the body indicating the opening price and the top of the body symbolizing the closing price. Similarly, if the stock closes lower than its opening price, a filled candlestick is shown where the top of the body marks the opening price and the bottom of the body reflects the closing price.

When compared to other traditional charts, most traders consider candlestick charts more appealing visually and easier to understand. Candlesticks chart analysis is followed by majority of the traders worldwide. Each candlestick offers an easy-to-understand depiction of price action. The trader can immediately see and compare the relationship between the opening and closing as well as the high and low. The relationship between the open and close is looked upon as very important information and forms the core of forex chart analysis with candlesticks.

Hollow candlesticks represent buying pressure, where the close is higher than the open. The filled or solid candlesticks, with the close are less than the open, point to selling pressure.

But what you don’t get to know in chart analysis with candlesticks is the series of events between the open and close. You will only know the relationship between the open and the close. The high and the low are apparent and clear, but candlesticks chart analysis will not be able to tell you which came first.