Explain Japanese candles in detail in 2022
We often hear from investors in the forex markets, and global stock markets, the term Japanese candles, what are these candles, how the investor can exploit them in anticipating the movement of stocks, and what are their types.
In this article, we provide you with the answer to all these previous questions, in addition to all the information you need to know about Japanese candles, in addition to explaining candles in detail.
The history of Japanese candles
There was an investor named Steve Nison who admired the Japanese style called candles, and as soon as he knew it, he used it to carry out his analytical and trading operations.
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It was Steve Nison himself who transferred the style of Japanese candles and their various patterns to the West, and in less than two decades candles became a favorite of many investors, especially on Wall Street.
After the great popularity of Japanese candles at the end of the previous millennium, Steve Neeson wrote many books about it and wrote a book explaining candles, so Neeson became called the master of candles.
It has even become a science that is explained and taught in universities, for its accuracy in predicting stocks and market volatility and the ease of use of different Japanese candlestick patterns.
An explanation of Japanese candles and how to read them correctly
As we said earlier, these candles are used to know the prices reached by a particular currency, a particular stock, or a particular commodity during the trading process.
It facilitates the process of reading the chart of securities for the investor and helps him to read the future movement, while studying the previous movement, knowing the data on the current and previous trends, and the expected trends, which enables him to trade with ease, and it also provides you with sufficient information about the opening prices. and shutdown.
Summary of all of the above: these are tools that help you to read the past and current data from the chart, and predict the future with high efficiency.
With the development of these candles, we got a lot of new forms of them, which the trader can use to read the data from the chart and predict the future price movement.
Explanation of reading Japanese candles
In the beginning, you should know that Japanese candles number more than 100 types, and in order to simplify your understanding of them and how to read them, we will divide them here into two types:
The first type: is reversal candles, which are candles that will help us identify the share price, and if it will reverse from a falling stock to a bullish stock or vice versa.
The second type: is the continuation pattern, which in turn tells us if the rising arrow will continue to rise, or the descending arrow will continue to decline or not.
The psychology of Japanese candles
The length of the candle body gives an indication of buying pressure or selling pressure. If we see a long green candle, this indicates that the closing price was much higher than the opening price, which indicates that the bulls (buyers) had the upper hand.
On the other hand, a long red candlestick indicates that prices at the close were well below the opening price, which is a sure sign that the sellers defeated the buyers in this battle.
When prices are not moving much, we notice that the candles become red or green small candles. This indicates that the buying and selling forces were equal and neither could pull the price towards it.
The length of the Japanese candle’s tail provides a clue to the extent of the trading range. See the chart below.
Since extensions show the highest price levels and lowest lows in a given time period, candles with long tails, extensions, or shadows indicate that prices have deviated significantly from the opening or closing price and that there is a huge battle apparent between buyers and sellers.
Small extensions on the other hand are an indication that prices have only ranged in a small range between the opening price and the closing price.
Explanation of Japanese reversal candles
Here we will only explain the most important Japanese candle reversal that traders should know.
We start our explanation of this type of candle with one of the most important reversal candles, the Doji candle.
This candle is defined as a candle in which the opening and closing price are at the same point, meaning that the selling price is equal to the purchase price.
This candle tells us that the market is experiencing a reversal.
Japanese candles are divided into several types:
The Doji candle that most traders know and whose shape is in the form of (+).
And another candle in the form (-).
A Doji candle comes with a tail candle that is longer than the tip of the other tail.
A Doji candle has a long tail on one end only.
reflexology hammer Japanese candles
The reflexology hammer candle was named by this name due to the similarity between it and the hammer, and the body of this candle is small, and it has a long lower tail whose length is at least twice the length of the candle’s body, and the longer this tail is, the stronger the candle.
The upper candle’s tail, if any, is very short, and there is a candle shape.
This candle comes at the end of a downtrend line to indicate a reversal of the trend.
The hanging man’s candle
This candle clearly indicates that it resembles the hanging man from its name, as its body is suspended, and below it is a long tail. It is just another name for the hammer candle.
This candle indicates a reversal of the bullish trend to a bearish one, unlike the hammer candle.
meteor Japanese candles
This candle is similar to the inverted hammer candle, but it expresses a change of direction from an uptrend to a downward trend, unlike the inverted hammer.
Bullish engulfing candles and bearish engulfing Japanese candles
At first, you have to realize that the engulfing candlestick pattern that we are talking about consists of two candles, the first candle of them is called the bearish candle, and the second candle is called the bullish candle, the closing of the bullish candle is higher than the opening price of the bearish candle, meaning that the (second) bullish candle engulfs the candle Landing (first).
The longer the bullish candle (the second), and the longer and larger the ruling, the stronger the pattern, and this pattern tells us that the bearish trend will change to an uptrend, and this is a simplified explanation of the bullish engulfing pattern.