Japanese candlesticks are perhaps the most convenient graphical indicator of the price dynamics of financial markets, which is confirmed by their General popularity around the world. Europeans with candlestick analysis was introduced by analyst Steve Nison: his book, a manual on the use of the method in a matter of weeks became a bestseller, and Neeson himself is still resting on its laurels "the godfather of candlestick analysis".
The reason for the popularity of candlesticks in their simplicity and clarity. Each candle consists of a" body", the upper and lower shadows (shadows may be absent). The candlestick body reflects the price range for a certain period of time, and shadows reflect its maximum and minimum value for the same period.
Indicator is the color of the candles. In an upward trend, when the closing price exceeds the opening price, the bullish candle is colored white or green. If the position closes lower than it opened, the candle becomes bearish, signals a downtrend and is colored black or red.
When analyzing the chart, traders compare the sizes of candlesticks and their shadows, as well as considering combinations of candlesticks.
Understanding the basic candlestick patterns can help you navigate the current market mood, so let's look at a couple of examples:
"Three white soldiers" and "Three black crows" are reflected on the chart as bullish and bearish candlesticks that absorb the values of the previous ones (promising a rise in the previous fall or, on the contrary, a decline in the positive trend before).
The appearance of such a candlestick formation indicates the incompleteness of the trend.
But antagonists "Inverted hammer" and "Falling star", on the contrary, signal a possible trend change or completion of the correction.
The hammer appears on a downtrend and is a bullish candle with a long upper shadow. As a rule, it is preceded by a bearish candle with a long body and a short shadow, but the "hammer" puts an end to the attempts of bears to hold the market.
The opposite situation develops when a "falling star" appears on the charts — a bearish candle with a short body and a highly raised "tail". The appearance of the" falling star " — a clear signal that the price of the asset begins to decline.
"Hammer" and "star" near the support and resistance levels are especially effective, and special attention should be paid to the length of the "tail" (shadow): the longer it is, the louder the candles try to yell at you about the upcoming turn.
