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Japanese Candlestick Patterns Explained by Mark Deaton, Japanese Candlesticks are the oldest form of technical analysis. It is a system that has been used since the 1700s to trade. In the beginning, it was used to trade and analyze rice trading. Over the centuries it has become used for many other analyses including but not limited to securities, options, and Forex. Japanese candlestick charts display market sentiment like no other form of charting can. With candlestick charts you have basically 2 moving parts. (If you will.) The real body, can be full or hallow, and the wicks or shadows can be long or short, or gone – either way, together you get a nice picture of price action today, or over a period of time. A high is marked by the top of the upper shadow or a wick. It indicates the highest point of the day in trading. The low is marked by the bottom of the lower shadow. If a security closes higher than it opened, then a hollow body is drawn. The top line of the body itself would indicate the close and the bottom line of the body would indicate the open. If a security closes lower than the opening price, then a filled body is drawn with the top line indicating the opening and the lower one indicating the close. (See below.) Candlestick charting is much more intuitive than any other form of chart reading once you learn some basics. A candlestick pattern can reveal price action relative to the past better than any other form of charting available. Not only do you get instant insight into current price action, but also that action relative to the past. Different body sizes represent the distance between open and close. A longer hallow body represents a nice bullish candlestick where the close is higher than the open. A longer filled or black body represents a nice bearish session / day where the close is much lower than the open. In the flip side short bodies represent a close and open relatively close to each other. Another characteristic would be a hollow or filled body with no shadows. These are called Marubozu or black & white. A white Marubozu would occur when the open equals the low and the close equals the high. A black Marubozu would occur when the open equals the high and the close equals the low. A long or short shadow with a short body are called spinning tops. Spinning tops represent indecision. The short body indicates that there was little change in the trading and the long shadows indicate there was a lot of activity with both bulls and bears. However it also indicates that neither buyer nor seller could get the upper hand, resulting in somewhat of a standoff. About the Author: Japanese candlesticks are the choice for professional traders and anyone who wants to have incredible insight on price action, and current market sentiment. If you aren’t using candlestick patterns to trade, you are absolutely missing out. To begin using Japanese candlesticks now visit our website and download our free introductory course. http://www.candlestickgenius.com
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