Japanese Candlestick charts is one of the oldest methods for analyzing graphs. In the United States and Europe they appeared very late, at the end of the nineties, however, they immediately gained a huge crowd of supporters. Today, candles provide very useful information for all kinds of investors, either at a beginner or very advanced level.
Japanese candle is made up of four elements: the opening price of the period, the closing price of the period, the lowest price of the period, the highest price of the period. A generic term used in the graph is OHLC (open, high, low, close).
A candlestick chart is a type of chart that analyzes the cause, not the effect and offers the ability to quickly follow the psychology of short-term actions in the market. However, do not ignore the emotions which are guided by the investors and their direct impact on the exchange of data values. Statistics can not under under circumstance measure the psychological impact of the market behavior, in some form, it is able to do this multidimensional technical analysis but even then, the results are not always consistent with the facts.
Neverheless, Japanese candles are able to read the changes in the investors' perception. This is then reflected in the movements of the exchange rate on the Forex market. Candles are much more than just a way to identify the formation. They show very accurately the interdependence between buyers and sellers. Graphs constructed using candlestick charts provide direct insight into the financial markets, which is not easy with the use of other methods of ploting. Furthermore, candlestick charts can be enriched with additional related techniques as filtering candles or candle charts, taking into account the market, which definitely enhances the analysis of new opportunities and broaden its horizons.
Each candle formation may contain one or more candles, but rarely more than five or six. Most candle formations have also their opposite counterpart – each band promoting growth has its counterpart. There is however, a significant difference between them rarely relative to their position in the short-term trend of the foreign exchange market.
The candlestick chart is the most perfect chart and it is best used for technical analysis for both beginners and advanced investors, not only because of the very accurate representation currency rates but also the very important fact that it absolutely reflects the psychological aspects of the Forex market .