Pro Forex Trading Training – Introduction to Technical Analysis and Candlestick Charting

Technical analysis method with candlesticks is a relatively new way of interpreting the change of price although candlesticks alone are more than 300 years old. 

 

Before introduction of candlesticks by Steve Nison in 1989 traders used to do technical analysis with standard bar charts which was much less convenient. Candlesticks have the capability of showing the chart flow and for a trader to very quickly understand how the price is changing and to feel what is the sentiment of market participants. 

The use of candlesticks has become really common in last years and today we can’t even think of a charting platform without including the candlesticks. According to the practice, analytic tools are used only for a period of time they prove to be effective and many centuries of candlesticks’ use show the real effectiveness of the method. 

But why are candlesticks superior over bar charts? According to the vast majority of the chartists around the globe – despite the fact that bar chart and candlestick chart both show same amount of price data (open, high, low, and closing price) – candlesticks also provide the insight of the market sentiment or current psychology of the investors, which is less likely to be seen on bar chart. Once you really know candlesticks and understand their implications you might get a feeling that there is something missing on a bar chart. 

Analysis with candlesticks is better and quicker. One of the most important factors for using candlesticks over bars is colored area between opening and close price which makes obvious id the candle is bearish (close is lower than open price – usually colored black or red) and which bullish (open price is lower than close price – usually colored white or green). Colored candlesticks also improve or insight on whether market is bullish or bearish and are a great tool for signaling the turning points because they have the possibility to show the market sentiment in areas of support and resistance quicker than with other methods. Since candlesticks primarily show short-term signals they are great to use for swing traders who are trying to make their profits with short term price movements.

About the Author:

Mark Hanselich, MPharm - I try to be as versatile as possible. I graduated in pharmacy, work as journalist, play soccer, have my own wine cellar and can communicate in six languages. I'm also personal development author and internet marketing specialist. Together with Mr. Daniel Maxoff I run the Website Anioc.com, dedicated to personal development, health and all the good things in our lives. You can also follow me on Twitter.