Japanese Candles Patterns
Japanese Candles were developed in the 18th century by the legendary rice trader called Homma Munehisa who used these candlesticks to give an overview of opening price, high, low & closing market price over a given period of time.
The candlesticks charts were used by the legendary rice trader to predict future market prices. After dominating the rice market, Munehisa eventually moved to the Tokyo exchanges where he gained a huge fortune using this candlesticks analysis. He is said to have made over 100 consecutive winning trades.
Types of XAUUSD Charts
There are 3 types of charts used in XAUUSD trading charts: Line charts, bar charts & candlesticks charts.
Line charts
Line charts - line charts are plotted using a continuous line connecting closing prices of a XAUUSD, XAUUSD metal.
Gold Line Chart
Bar Charts
Bar charts - bar charts are displayed as sequence of OHCL bars. OHCL represents OPEN HIGH LOW & CLOSE price. The Opening price is displayed as a horizontal dash on the left and closing price as a horizontal hyphen to the right.
XAUUSD Bar Charts
The main disadvantage of bar charts is that they are not visually appealing; therefore most Gold traders don't use these charts.
Candlestick Charts
Candlestick Charts - candle charts use the same price data as bar charts (open, high, low, and close price). However, these charts are presented in a much more visually identifiable way which resembles a candlestick with wicks on both ends.
Gold Candlesticks Charts
How to Interpret Japanese Candles Charts
The rectangle part is called the body of the candlestick.
The high & low are described as shadows and plotted as poking lines.The color is either blue or red
- (Blue or Green Color) - Shows prices moved up
- (Red Color) - Shows prices moved down
Most trading platforms like the MT4, use colors to mark the direction of the candlesticks. Colors used are blue or green: when the price moves up and red: when price moves down.
When candlesticks charts are used it is very easy to see if the price went up or down as opposed to when bar charts are used.
XAUUSD Candles Charts vs Bar Charts
The Japanese candlesticks charting techniques also have very many formations that are used to trade the Gold Metal. These candlestick patterns have different technical analysis interpretation & the most common Japanese candlesticks patterns are:
- Marubozu & Doji candlesticks
- Spinning Tops candlesticks
- Reversal Patterns candlesticks
- Inverted Hammer & Shooting Star candlesticks
- Piercing Line & Dark Cloud Cover candlesticks
- Morning Star & Evening Star candlesticks
The above Japanese Candlesticks patterns is what makes the Japanese candlesticks charting popular among technical traders and it is why this type of analysis is the most widely used when it comes to analyzing the Gold metal prices. The analysis for these candlesticks pattern formations in XAUUSD trading is the same as that one used in stocks trading as well as Forex trading.
Drawing These Candles Charts on MT4 Platform Software
To draw these candlesticks charts on the MetaTrader 4 software, choose the charts drawing tools within the "MetaTrader 4 Tool-Bar" as shown below.
MT4 Charts Drawing ToolBar
To view this charts tool-bar on MT4 go to "View" Next to file at the top left corner of the MetaTrader 4 Software, Click "View", Then Click "ToolBars", Then check the "Charts" Button. The above tool-bar will appear.
Once the above charts toolbar, appears you can then choose the chart type you want to convert to, If you want to view using the bar charts format, click the bar chart toolbar button as shown above, for line charts format click the line chart tool-bar button, for Japanese candlesticks format click the "candlesticks chart toolbar button".
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