What are Japanese Candlesticks?
Japanese candlesticks are a valid, effective and popular form of technical analysis. A Japanese chart can show investor sentiment, trading trends, and much more.
Technical Analysis
When trading, something is needed to keep us from falling victim to everyday emotions; that something is technical analysis. Almost all methods of technical analysis generate useful information, which if used for nothing more than uncovering facts about market behavior, will increase our understanding of the markets. Technical analysis competence does not ensure successful trading, but without it we are unlikely to be successful at all. Traders who lose money do so not only because of bad technical analysis, but because of their inability to transform their technical analysis into sound practice. We must overcome fear, greed, hope, impatience and other emotions that cause us problems. We must have the discipline to follow a sound trading method, even during times of temporary adversity.
Japanese Candlestick Analysis
As a form of technical analysis, a Japanese chart and candlestick pattern analysis will help anyone who wishes to have another tool at their disposal; a tool that will help sort and control the constant disruptions and continued outside influences to sound stock, futures, and Forex market analysis.
What does a Japanese chart offer that typical Western high-low bar charts do not? As far as actual data displayed — nothing. However, when it comes to visual appeal and the ability to see data relationships easier, candlesticks on a Japanese chart are exceptional. It reveals quick insight to the recent trading psychology and investor sentiment. After a minimal amount of practice and familiarization, Japanese candlesticks will likely become part of your technical analysis methods.
Japanese candlesticks offer a quick picture into the psychology of trading, studying the effect, not the cause. This places Japanese candlesticks squarely into the category of technical analysis. We cannot ignore the fact that prices are influenced by trader’s psychologically driven emotions of fear, greed, and hope. Some form of technical analysis must be used to analyze the changes in these psychological factors. Japanese candlesticks read the changes in the makeup of trader’s interpretations of value, otherwise known as investor sentiment. This is then reflected in price movement. Japanese candlesticks show the interaction between buyers and sellers. A Japanese chart provides insight into the financial markets that is not readily available with other charting methods. It works well with stocks, commodities, and Forex.
This introduction to Japanese candlestick charting and technical analysis will also provide information of the usefulness of Japanese candlestick patterns as a technical analysis tool. All methods of technical analysis and all assumptions will be open and visible. You will either begin to use candlesticks and a Japanese chart to assist in your market analysis and timing or be confident enough in them to further your own research into Japanese candlestick technical analysis.
The Origin of Japanese Candlesticks and Japanese Chart
Japanese candlestick charts have been around for hundreds of years. As a matter of fact, they are attributed to a Japanese Rice Trader named Homma Munehisa, back in the 18th century. Because of its longevity, wouldn’t that tell you something about how useful and accurate candlestick charting is? Even though its been around for hundreds of years it’s still hard to find anyone, except the experts, who understand it well. Japanese candlestick charts have all you are looking for in a trading method that allows you to profit in the markets. You shouldn’t ignore other methods, but candlestick charting could be a main component of your trading method.
Japanese candlestick charting doesn’t take months to master. With practice, the patterns can be memorized in a few short weeks and you will begin to see the patterns reveal themselves on the charts at a glance. That’s one of the basis points of 20MinuteTraders. With a Japanese chart and technical analysis, the patterns stick out like a hundred dollar bill in a change jar. You will no longer have to spend as much time analyzing a single market. Japanese Candlesticks and a Japanese chart work in ANY market over ANY time frame, and since it takes much less time to study a chart in candlestick form you can cover more charts in less time. How’s that for a timesaver?
While Japanese candlestick charting is relatively easy, and it doesn’t involve complicated formulas or extensive calculations to master the method, it is extremely powerful and accurate. Used along side other market indicators you can build a method that works for you and makes you successful. Will you profit on every trade? No, of course not. Not unless you are extremely lucky. However, a Japanese Chart and Japanese Candlesticks can help you be successful and profit more than you lose. When read correctly, a Japanese chart and Japanese candlesticks can even show you investor sentiment for a given market.