Candlestick Patterns For Intraday Trading: History of Japanese Candlesticks
Japanese rice trader Munehisa Homma is widely credited with creating candlestick charts in the 18th century. His ability to manipulate rice trading markets was legendary. Through the ages, his candlestick methods may have been further modified and adjusted to become more applicable to current financial markets. Steven Nison introduced candlesticks to the West with his book “Japanese Candlestick Charting Techniques“. Candlesticks have become a staple of every trading platform and charting program for financial trading. Candlestick charts are popular among traders because of their depth of information and simplicity. Its ability to chain together many candles to reveal an underlying pattern makes it an invaluable tool for interpreting price action history and forecasts
Candlestick Charts: How to read candlestick patterns for intraday trading
The candlestick has three parts: the upper shadow, the lower shadow, and the body. The body is green or red in color. Each candlestick represents a segment of time. A candlestick chart shows all of the trades that took place during that specific time period. A 5-minute candle, for example, represents 5 minutes’ worth of trades. Every candlestick has four data points: the open, high, low, and close. Open and close refer to the first and last trades for a specific period. Candles are considered to have a body when they open and close.igh price are high-priced, and trades with a low price are low-priced.
The high is represented by a vertical line extending from the top of the body to the highest price. Low is represented by the lower shadow or tail, which is a vertical line extending downward from the body. A green body indicates a net price gain when the close is higher than the open. When the open is higher than the close, the body is colored red as it represents a net price decline.
Patterns of candlestick charts
Each candlestick tells a story of the showdown between bulls and bears, buyers and sellers, supply and demand, fear and greed. It is important to keep in mind that most candle patterns require confirmation based on the context of preceding and following candles. Beginners make the common mistake of spotting a single candle formation without considering the context.
When a hammer candle forms after three preceding bearish candles, it represents a near-term capitulation bottom, but when it forms on a ‘flat’ sideways candle, it is basically useless. For this reason, it is important to understand the ‘story’ that each candle represents in order to grasp the mechanics of candlestick chart patterns.
When overlooked, these patterns tend to repeat constantly, but the market will just as often try to fool traders in the same vein. Due to the colors of the bodies, candlestick charts typically represent more emotion. To achieve best results, it is prudent to make sure they are incorporated with other indicators. Here are a few common candlestick reversal patterns.
Do not over-trade
– Antoroy
Candlestick Patterns For Intraday Trading:
In intraday trading, candlestick patterns refer to buying and selling forex market, stock market, or share market on the same day, without any open positions left by the end of the day.
Within the same day, candlestick patterns are used by intraday traders to either purchase a share at a low price and sell it higher or short sell a share at a high price and buy it lower. To do this, they need a good understanding of the market and relevant information that can help them make the right decisions. Demand and supply determine the price of a stock on the stock market.
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