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Candlestick Analysis Patterns

Candlestick Analysis Patterns

As a method, candlestick analysis was invented by Munehisa Homma, a Japanese trader who lived in the Middle Ages. The specialist created a system thanks to which it was possible to predict price fluctuations without technical analysis tools. In essence, the inventor of the new approach sought to understand the psychology of the market.

In the West, this method became known thanks to the works of Steve Nisson. In his book, he described the basic principles of working with the selected type of analysis, and also showed a large number of really working models that are successfully used by millions of traders around the world.

Candlestick analysis and its essence

The Japanese candlestick is based on 2 components: a body and a shadow. This model is designed to demonstrate price fluctuations over a selected period of time. I must say that the task is being completed. If we talk about the types of Japanese candlesticks, then they are bullish and bearish. The classic version suggests painting the body of the bearish candlestick black, and the bullish candlestick white. However, each merchant has the opportunity to freely choose the colors in their own terminal - according to their preferences. One candlestick provides information analysis in trading on the following points:

  • The cost of opening a specific period (for example, 1 hour).
  • The smallest value.
  • Price maximum.
  • Quotes that closed the same period. If, for example, candlestick analysis is performed on the H1 chart, then each candlestick will show fluctuations for an hour.

Despite the emergence of the information model back in the 18th century, it works today, and for many it has become the default schedule. The reason is that even a quick glance allows you to determine the prevailing trend and, based on this, suggest further movement of quotations due to candlestick market analysis.