Before discussing what a forex candlestick is we will discuss what forex is. The term is taken from the foreign exchange and it means to take part in exchanging currencies of one country for another. When you read about the forex market it may be referred to as the foreign currency exchange, foreign currency trading, or foreign exchange trading. Sometimes you will see forex simply referred to as FX. Either way, forex refers to the exchange of currencies.
Currency rates are always fluctuating depending on supply and demand as well as economic and political influences in different countries. The goal of the forex trader is to detect the currency that will soon rise or fall in value against another currency. The use of the forex candlestick can help investors determine this. This is further explained below.
Candlestick trading involves the reading of stock charts to detect visual signals that depict investor sentiment. Many investors prefer to use candlesticks charts over of other types of stock charts, such as bar charts, line charts, point and figure charts, etc. They believe that candlestick charts provide more information rather than just showing market noise.
There are numerous candlestick patterns that investors must memorize and be able to detect before they can start trading forex. The open, high, low and close are shown on a candlestick and if the close if higher than the open, the candlestick is white or hollow. If the close is lower than the open, the candlestick is black, or filled in. This part of the candlestick is referred to as the body whereas the thin lines above and below the body are called shadows and represent the entire trading range.
When forex candlestick charting, the shadows represent the high and the low. The top of the upper shadow obviously represents the high and the bottom of the lower shadow represents the low. The shadow also reflects the intra-period high and low. These periods range from 5 minutes, to 15 minutes, to one hour, daily or weekly. If you see a short shadow on the candlestick pattern, this tells the investor that the trading was confined closely to the open and/or the closing price. Conversely, if the see short shadows, this tells the investor that the trading extended far beyond the opening and/or closing price.
There is a lot to learn when studying Japanese candlesticks however, once you learn, you will find it a fairly straightforward technical analysis method that you can easily incorporate into your daily trading routine. Continue to learn about Japanese candlesticks and determine if it is a method that will work for you.
Market Direction: Whether trading stocks, options, Forex, or commodities, candlestick analysis works effectively for trading any of these markets. There is one basic element involved in any of these trading markets, human emotions! Candlestick analysis takes advantage of the information created by investor sentiment. Investor emotion is what moves prices. Fundamentals is just an element applied to investor decisions. As illustrated many times in the past, the best companies in the world will go down when overall market sentiment is bearish. Crude oil prices went from $50 a barrel to $147 a barrel back to $35 a barrel. Fundamentals had nothing to do with this severe price move. Investor perception of what was potentially occurring is what moves prices. Candlestick analysis is merely the graphic depiction of what is occurring in investor sentiment. Master the common sense evaluation of what candlestick signals are revealing, you will be part way to consistently making huge profits from the markets.
Why just part way? The best trading program in the world will not make everybody money if they do not have control of their own emotions. Have you ever wondered why some people make excellent profits from the market while others consistently lose money? The answer is very simple. A successful investor has control of their emotions. An unsuccessful investor, even though they may be using a successful trading program, will not make money if they do not control their emotions. This may appear to be an understatement, but most investment trainings do not address this very important aspect of investing. Candlestick analysis provides a very powerful discipline process. The utilization of the information built into candlestick signals can greatly reduce emotional decision-making. However, every investor has to knowledge their own weaknesses when it comes to investing their own funds. As many of us have experienced, controlling our emotions is not as simple as it may seem.
Utilize the information in the Candlesticks Forums newly released training e-book. "Controlling Emotions with Candlestick Analysis". This is not a fun e-book to read. Most investors want to hear how easy it will be for them to use a trading program and create huge profits. Unfortunately, reality dictates that buying and selling positions requires rational thought processes. These thought processes can get skewed very easily. Fear and greed can dramatically alter a game plan once a trade is in progress. Are you entering trades at the wrong time? Are you waiting for the price to move before you gain confidence to enter a trade? Do you have problems taking profits, fearing the price may continue much higher after you sell? Take time to understand what your weaknesses are. This e-book illustrates a multitude of common investment flaws. Reading this book is going to expose some gut wrenching traumas most investors experience. Learning the proper resolutions for controlling specific emotional situations will not eliminate them from your learning process. But it should greatly reduce the number of times an investor has to experience them before they become ingrained. Click here for the emotions training e-book special.
The purpose of candlestick analysis is to be in positions where the probabilities are greatly in the investor's favor. Understanding what the signals and patterns should be revealing is the most prominent method for eliminating emotions from investment decisions. The last newsletter demonstrated how the Fry Pan Bottom Pattern had the potential of producing huge gains. Those gains were experienced in the EYE chart. Buying a stock at $8.50 and selling it four days later at $21.50 will invoke the preferred emotional response, Whoopee-happy!!!! The problem is dealing negative situations. This is where control of emotions is critical.
One of the Candlesticks Forums recent recommendations was ARTC. It was holding up extremely well against the recent market pullback. This morning, after comments from the company that their fourth-quarter outlook may not be very good, the price gapped down on the open. This usually causes an emotional reaction. The first tendency is to "hope" for something to salvage the trade. Knowing what should be done based, upon the chart pattern, immediately eliminates the emotions. The evaluation that produced the buying of the position is now completely negated. It is not performing as expected based upon what the signals were inferring on the chart. What should be done? Close look position immediately! There will always be negative surprises. That is why they are called surprises. Fortunately, based upon the probabilities built into candlestick signals, for every negative surprise, there will usually be three or four positive surprises. Taking the proper action immediately eliminates the emotional evaluation of what to do in a position that is not performing as expected.
The pullback in both the Dow and the NASDAQ put the stochastics in the oversold condition. This is the time to start watching for a potential candlestick reversal signal. That does not necessarily mean a candlestick reversal signal will occur, it merely increases the probabilities that a reversal signal could occur. A trend will continue in its current direction until a confirmed candlestick signal is witnessed. Today's trading produced Spinning Tops in both the Dow and the NASDAQ. The trading strategy becomes very simple knowing what to expect after these potential reversal signals. Taking advantage of the information that has been provided by candlestick signals throughout the centuries allows investors to participate in high probability profitable trades at much more optimum levels than all other technical programs.
Candlestick online training program - If you want to learn the comprehensive thought processes that make candlestick signals successful, do not miss the opportunity to participate in the Candlesticks Forums Online Training program. It is scheduled for January 24 and 25th. This two-day training program walks you through the logic of candlestick analysis. Witnessing candlestick signals in a clear chronological order makes understanding the rationale for successful investing very easy to understand. Sign-up today! Seating is limited so as to be able to converse with each participant. This is not theoretical training. This is pure nuts and bolts that has worked successfully. Click here to sign up today.
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