How to use Japanese candlesticks? Well, this is what you are going to learn from A to Z. I remember when I was in school, I learned to read graphics. It was necessary to understand the evolution of a line on 2 axes.
I didn’t really like math but graphics, I liked it. So when I decided to start trading, I said to myself “SUPER, I’m going to try to understand how a chart evolves”…
Except that in trading, we don’t use a continuous line as I learned at school.
Finally yes, we can use a continuous line but no trader does that! We use candlesticks. What else is this thing … Well, as usual, it’s not very complicated to understand. So let’s see how to use Japanese candlesticks.
Why use Japanese candlesticks?
In trading, we follow the evolution of the price over time. The X-axis is time and the Y-axis is the price. We could use a line to represent the evolution of the price, but we would only have one piece of information: the price at a time “t”.
Japanese candlesticks give more information. A candlestick corresponds to a period. If you look in the top left corner of the photo above, you can see: “EURUSD, H1 ……”
This means that we are on the EURUSD chart and H1 tells us that we are on an interval 1 hour time. Which means concretely that a candle represents what it happened over 1 hour of time.
How to read a candlestick
The candlestick is made up of 2 things:
– The body, which is the full and coloured part. Colour gives us meaning. A red candle indicates that the price is going down, a green one that the price is going up.
– Wicks, which are the small straight lines above and below the body.
This candle gives us 4 pieces of information, as we can see in the drawing below:
1. The opening price during the period covered by the candle.
2. The price at the end of the period covered by the candle.
3. The highest price that was reached during the period.
4. The lowest price was reached during the period.
I don’t think it’s exaggerating to say that 99.9% of traders use Japanese candlesticks. These give much more information than a single line. You have to familiarize yourself a little with this strange display but you will quickly realize that … Japanese candlesticks are not Chinese!
I invite you to ask me your questions in the comments. I will answer it with great pleasure.
Thank you for reading this article!