Japanese Oil Trading Candles Patterns Explained
How to Read Candlesticks in Oil Trading - Japanese Crude Oil Trading Candlestick PatternsBrief History
Candlestick were developed in the 18th century by the legendary rice trader known as Homma Munehisa to give an overview of opening, high, low & closing market oil price over a given period of time.
They were used by the legendary rice trader to predict future market oil prices. After dominating trading the rice market, Munehisa then eventually moved to the Tokyo exchanges where he then gained a huge fortune using this analysis. It is said that He made over hundred consecutive winning trades.
Types of Crude Oil Trading charts
There are 3 types of charts used in Oil Trading: Line, bar & candles.
Line - plots a continuous line connecting closing oil prices of oil.
Bars- displayed as sequence of OHCL bars. O H C L represents OPEN HIGH LOW & CLOSE. The Opening crude oil price is displayed as a horizontal dash on left & closing crude oil price as a horizontal dash on the right.
The main disadvantage of a bars is that it isn't visually appealing, therefore most traders don't use them.
Candlesticks - these use the same crude oil price data as bar oil charts (open, high, low, and close). However, they in a much more visually identifiable way which resembles a candle stick with wicks on both ends.
How to Interpret
The rectangle part is called the body.
The high and low are described as shadows and drawn as poking lines.
The color is either blue or red
- (Blue or Green Color) - Oil Trading Prices moved up
- (Red Color) - Oil Trading Prices moved down
Most trading platforms like the MT4, use colors to mark the direction. Colors used are blue or green: when crude oil price moves up, red: when crude oil price moves down.
Candles Vs. Bar Crude Oil Trading Chart
When candlesticks are used it's very easy to see if the crude oil price moved up or down as opposed to when a bars are used.
The Japanese techniques also have very many formations that are used to trade the Oil market. These patterns have different technical analysis explanation & the most common are:
The above patterns is what makes the Japanese candlesticks popular among technical traders & it is why this type of analysis are the most widely used when it comes to analyzing the crude oil market. The analysis for these pattern formations in oil trading is the same as that one used in stocks trading.
Drawing These Charts on MT4
To draw these on the MT4, select the charts plotting tools within the "MT4 Toolbar" - shown below.
To view this tool-bar on MetaTrader 4 go to "View" Next to file at the top left corner of MT4 Platform, Click "View", Then Click "Toolbars", Then check "Charts" Button Key. Above toolbar will appear.
Once the above tool-bar, appears you can then choose the type you want to convert to, If you want to view using the bar format, click the bar tool button as illustrated above, for line format click the line tool button key, for Japanese candles format click the "candlesticks tool button".
