Friday, October 12, 2007

Power of Candlestick assist you in Forex Trading

An Introduction To Candlesticks There are two ways to analysis a market price, (i) fundamental analysis, (ii) technical analysis.

Fundamental analysis- is used to gauge the market price according to the number of stock, such as price or earnings ratio, return on invest, or anything related to the economic statistics.

Technical analysis - is used to deal with psychological component especially the emotionalism of traders. It is always seeking answer for the question "how are other traders viewing this stock, and how would them react for that future trading?. So, the candlestick chart is always considered as the most effective way to gauge the reactions of other traders.

Lets compare the candlestick charts with the western charts. There are four components in the western bar chart, (i) open, (ii) high, (iii) low (iv) close. For the vertical bar, the top and bottom of the bar represents the high and low of the session. For the horizontal bar, the left horizontal line represents the open and the right horizontal line represents the close.

By using the same data, the Japanese Candlestick Line has created a much more visualize pictures to show the traders how the market stock is going. The main colour thick part of the candlestick bar is called the real body. It represents the range between the price of opening session and close session. The red real body represents that the session close at a lower price than the open point; while for the green real body, it represents that the session close at a higher price than the open point. The top and bottom lines are called shadows. The shadows represent the extremes of one sessions price. The top part shadow is called the upper shadow and the bottom part shadow is called the lower shadow. So, the upper shadow represents the high of the day and the lower shadow represents the low of the day.

The major difference between the Western Line and the Japanese Candlestick line is the relationship between opening and closing prices. The Western Line gives more priority to the closing price regarding to the previous close. But for the Japanese Candlestick Line, the Japanese gives more priority to the close regarding to the open of the same day. To make the words clearer, lets compare the daily chart plotted with Western Lines and the Japanese Candlestick lines by using the same data. There is nothing much difference between those charts as both charts can be easily interpreted the overall trend of the stock. However, with the Japanese Candlestick chart, the sentimental changes day to day is more easier by viewing the real body colour changed (from green to red or vice versa).

I know it is very difficult to visualize without the graphic assisted. But i have no idea to put the chart and candlestick bar here. If you need more information, go Easy Forex Strategy or

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