The language of candle sticks-Basics

Candlestick charts are one of the best tool in technical analysis to understand the movements in the foreign exchange market. The candlesticks when properly read will tell you

• what has happened in the market for a particular period of time.
• show you the signals about the possible future movements.
• clearly gives an idea to the trader, the emotions of the market.
• easy to analyse when compared to the bar charts

A short History

The origin of candle stick charts dates back to 1700 AD. A Japanese rice merchant Munehissa Homma was the first to introduce the candlestick method and he made a fortune by trading rice with the help of this method.This system became popular in other parts of the world only by 1980's. Nowadays this is the most common charting method among  forex traders.

How to draw a candlestick?

The candle stick is made of a real body and wicks or shadows. The real body shows the opening and closing prices  at a particular time period and the shadows show the highest and lowest price reached during that period.

Candlesticks are of 2 types

1. Bullish candle stick: shows price is moving up

                         closing price will be above opening price. This says that the price is moving up.

     2. Bearish candlestick: shows price is moving down.
                   closing price will be below the opening price. signifies the price is moving down.

A candlestick chart will have a combination of both these candle sticks in varying length.
How to use candlestick chart.
 These candlesticks will form certain important patterns which act as a warning signal before the price changes.Candlestick chart patterns combined with other technical analysis tools like support and resistance areas, fibonacci, moving averages etc will give you the best forex trading strategies.

Learn the important candlestick chart patterns that help you to predict the market movements.