What Is Candlestick Forex Trading?

What is candlestick forex trading? Before looking into this question, let’s take a look at the nature of forex rates.

Forex rates are highly volatile and fluctuating, depending on many factors like, supply and demand as well as economic and political influences in different countries. The aim of a currency trader is to detect the currency that will soon rise or fall in value against another currency. Hence, it is of utmost importance for the forex trader to use an effective technical analysis that takes care of all fundamentals, including expectations, and is reflected in exchange rates. It is important to predict future price trends from available price and volume data. Read on to know more about Forex candlestick charts.

japanese candlestick charts are one of the most popular among traders when dealing with Forex. One cannot ignore the importance and impact of this methodology which involves Technical analysis of the market. Let us now dig into what is Currency trading candlestick about?

Japanese candlestick charts are possibly the most readable charts available for technical analysis. Although they were invented in Japan, during the 18th century, they are still widely used and popular.

Forex candlestick charts show information about the price action and the movement of the forex price over a specified period of time. It shows the market’s open, closing, low and high of that specific time frame. In the daily chart, each candle represents a 24 hours period, containing information of the daily open and daily closing price, the highest and lowest price during that day. The hourly chart, each candle represents an hour and so on.

But as the currency trading market is a open 24 hours, there is no actual daily open or closing price. A certain time is decided as the daily open and closing time, which may vary with different chart providers. Different providers may provide currency trading candlestick charts which are slightly different to each other.

understanding Forex candlestick is not too difficult. The major component of a candlestick is the body, i.e. the rectangular shape between the open and close points. Traditional Japanese candlesticks charts use black and white bodies, but you will also come across the use of red and green colors.

Real Body
This is the broad part of the candlestick chart figure, displaying the range between the open and the close price. If the close is above the open, then a hollow candlestick, usually displayed as white is drawn. If the close is below the open, then a filled candlestick, usually displayed as black is drawn. This hollow or filled section of the candlestick is called the “real body” or body.

Shadows
The thin lines coming out of the real body of the candlestick chart figure are the shadows representing the extreme prices. The upper shadow having a peak signifies the session's high; while the lower shadow is the Forex session's low.

One of the biggest advantages of Forex candlestick charts is that with just one glance, one can observe and absorb a lot of information about the online currency trading. This is not the case while using other kind of charts like Line chart or Bar charts. Japanese candlestick pattern are quick to bring into your notice the difference between the open and close prices of the forex trade. With Candlestick forex trading, you can protect your investment by analyzing the unique visual cues which make reading price action easier.