Japanese candlesticks: Find out what they are and how to interpret them.
Every investor who wishes to enter the world of the stock market must know exactly what Japanese candlesticks are; they are nothing more than a graphical representation that helps to reflect the price of an instrument, and all this through candlestick patterns.
For this reason, we can highlight that the Japanese candlesticks are composed of a body and two wicks; they reflect the behaviour of the price during a specific period of time.
Candlesticks are a very useful tool for investors, as they provide them with an accurate understanding of market trends.
We can define these as a chart that helps to show the behaviour of an asset in a specific time frame; all this through the patterns it has, it is possible to determine the next movements.
There is no doubt that candlesticks are a good ally for investors, as they are part of technical analysis, which seeks to predict the future of financial assets by means of different charts.
What we want to explain to you is that with the help of the Japanese candlesticks and the patterns they show, the investor will be able to predict, more or less correctly, what will happen in the near future with this security.
Below we will explain a little more about candlesticks, and how they offer greater security to any investor who studies them.
How to interpret Japanese candlesticks correctly?
The most improbable point of the Japanese candlesticks and any other type of instrument is to know how to interpret them in order to make the most of them.
In this sense, they are in charge of displaying a signal that reflects the upward or downward movement of that market, as well as other types of important variables.
What does this mean? From this point it is possible to draw conclusions and thus determine the ideal time to make an investment, of course, according to the trends reflected in the graph.
Remember that to achieve this point in the best possible way; it will be necessary to analyse in detail certain types of elements linked to the Japanese candlesticks, such as:
- The multiple patterns.
- Colour of the candles.
It is worth noting that all of this means that the length will help you to know what are the lowest and highest points reached by that specific asset.
On the other hand, the blue colour of the Japanese candlesticks represents an uptrend, while the red colour shows a downtrend.
It is important to analyse in detail the length of the wick of the Japanese candlesticks, as this can represent the intensity of a signal, which means that although the colour is blue, it is very likely that the trend will soon be bearish.
Types of candles Find out which ones are most commonly used!
Japanese candlesticks are divided into three different groups, which are the most commonly used, as follows:
- The marubozu.
Commonly marubozu are those that go in one direction only, and are preferred by traders as they have no shadows, which means they can reflect the momentum of a specific trend or the break of the move itself.
All of this makes them the most profitable times to enter the market, so take advantage of them to check them against your investment strategy.
On the other hand, the Japanese Hanmer candlesticks show the frustrated movement or intention, which usually happens when repetitive buying suddenly stops.
This is defined as a static shape that occurred in the price of an asset, which is nothing but loss for many people around the world; for all this, the shape of the Japanese candlestick is a small body with a long shadow that can show some of the frustration of the movement.
Finally, the Japanese Doji candlesticks do not show a clear intention of the price, therefore they are much smaller candlesticks, which are characterised by the fact that the opening and closing prices are almost the same.
This reflects the fact that there is not much interest in an asset, in this sense, each of the Japanese candlesticks have different performances that need to be carefully assessed before deciding whether or not to invest money.
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Disadvantages to consider before trading Japanese candlestick patterns
With all this information we have put together for you, it is very clear that candlestick patterns are a very useful tool to help investors make the best decisions.
However, it should be borne in mind that it is of great importance to use them properly in order to get the most out of them.
Therefore, trading only the patterns offered by candlesticks may have some disadvantages, as they do not allow you to see the overall map of the market beyond the price.
This is a huge problem when you are in a very volatile market, so it is best to use them with the help of other types of instruments to make the best and right decision.
Before starting with candlestick trading, it is necessary to have the help and knowledge offered by guides and tutorials so that every trader has the opportunity to make a profit.
It is worth noting that all these characteristics make Japanese candlesticks one of the best allies for any trader.