Japanese Candlestick charts

Birthed by Late Munehisa Homma (1724-1803), a Japanese merchant of rice trading. This technique of trade analysis and presentation originated in Japan 100s of years ago and was introduced to western world in a 1990s publication titled Japanese Candlestick Charting techniques which was written by late Steve Nison. It has dominate other charts by remaining most commonest method of presenting a market trend (negative or positive fluctuations) and taking a decision within a predetermined time ranging from minutes to a months.

Screenshot from Meta trade 5


Unlike it counterparts, it shows a trader the high/low price and opening/closing price of any currency using a graphic chat interface. The high price which is termed as bullish is represented with white color bar while the low price which is termed as bearish is represented with a black color bar although green and red is now frequently used, this colors can be change in settings .

The Japanese candlestick can be used to trade currency (fiat and crypto) and commodities etc.

QUESTION B: In your own words, explain why the Japanese candlestick chart is the most used in the financial market.

The Japanese candlestick patten is the most used in financial market because of it outstanding results. An enumeration are below;

• Indicators: The Japanese candlestick have some powerful indicators such alligator indicator, average directional movement index (ADX), stochastic oscillator etc. that are used by traders to fortify their decision before diving into a market.

• Accuracy: The accuracy that Japanese candlestick give traders is incomparable. This accuracy includes every direction (both uptrend and downtrend). It is this feature makes it most preferable in finance market.

• Less complex: The Japanese candlestick is not complex to understand compared with any other.

• Survey: A trader can survey the direction of the previous market, current state and hence be able to forecast the future trend at ease.

Trade safety: Applying candlestick helps traders to know the proper direction to follow. That is; the proper time to open, maintain and exit a trade in order to remain in the profit side.

Furthermore, candlestick offers valuable information than it counterpart (bar chat). It helps user to comprehend the lifestyle and interaction of buyers/sellers on commodity/assets.

QUESTION: Describe a bullish and bearish candlestick. Also explain its anatomy (original screenshot).

Bullish Candlestick:

This Japanese candlestick is used to display buy momentum for a market as a result of increase in demand than supply. In this candlestick, the candlesticks moves in an upward direction and signifies that there is an increase in price value of the commodity. Bullish candlestick are most represent with green colour.

Screenshot from meta trade 5

Bearish candlestick:

The bearish candlestick is used to represent the negative momentum (I.e decrease in price) of a price as a result of increase in sell than demand. This momentum is mostly denoted with a red colour. This candle opens at the upper shadow and close at lower shadow.

Screenshot from meta trade 5

Anatomy of Bullish candlestick

The anatomy of bullish candlestick consist of three major parts and four sub-parts.
They are;

• Upper shadow: High and close.
• Lower shadow: Open and close
• Real body

Source

Open: This is a sub-part that is found at the lower shadow of the bullish candlestick. It appears immediately and takes over the price momentum immediately the previous candlestick complete it formation.

Close: In bullish candlestick, close is found on the upper shadow of the candlestick. It is the end of the candle formation which indicates the end of the price on it and also offers opportunity for another formation to takeover.

High: It is located on the upper shadow and otherwise called maximum price. High is the highest price level that the traded commodity/asserts have reach within a specific time.

Low: Low is located on lower shadow of candlestick. It is otherwise called minimum price. Low is the lowest price momentum of an accent/commodity at a certain time.

Real body: This part is the filled body of the candlestick that appears in between the lower and upper shadows.

Shadow: It is the candle wick appears above and below the candle.

Anatomy of Bearish candlestick

The bearish candlestick is a ‘mostly’ red in color candlestick that it anatomy is inverse of bullish candlestick. It consist of three major parts and four sub-parts as well.

Source

Open: Otherwise called opening price, it is the beginning of the bearish candlestick formation after taking over from previous. In bearish candlestick, Open is located at the upper shadow.

Close: It is the point that the candle stops/complete it formation. It located in the lower shadow of a bearish candlestick.

High: It is the highest negative price momentum that an asset/commodity have reach within specific time before the formation of another candlestick. It is located at the top of the candlestick wick (upper shadow).

Low: It is the lowest negative price momentum within a particular time. It is located at the buttom of the candlestick (lower shadow).

Real body: Just like bullish candlestick, real body is the part of the candlestick that is in between the upper and lower shadow.

Shadows: The candlestick wick that appears at the top and bottom of the real body.

Furthermore on anatomy, both bullish and bearish candlestick can have the same pattern anatomy during it opening and closing. Anatomy of Patterns such as Marubozu pattern does not have wicks. Dragonfly candlestick pattern anatomy have a long bottom wick without any upper wick while Gravestone candlestick pattern anatomy have a long upper wick without a bottom wick. Hammer pattern anatomy have a long bottom wick and small upper wick while the pattern anatomy of inverted hammer have a long upper wick and small bottom wick etc.

Conclusion

The Japanese candlestick method of analyzing market trend have offer traders a stress free method. The adoption of it in global market have trigger the idea of creating more indicators by professional traders in order to felicitate their experience.

The benefits of applying Japanese candlestick in trade is incomparable to any other method e.g Bar chat. Thanks to Late Munehisa Homma, the trader that birth the idea and Steve Nison that exposed it to the entire world.

This cause fuel my capabilities to research more about candlestick of which I will not forever anything that I learned during my research.

Special thanks to Prof. @reminiscence01 for this amazing course. Much respect to prof. @dilchamo and co for taking time to read and score students efforts.
Thanks for reading my post.