Japanese Candles In Forex Trading
Bulls against Bears
The candle shows an antagonism between Bulls (buyers) and Bears (sellers) for the given period of time. It can be similar with it single combat between two soccer teams which we also can name Bulls and Bears. The bottom (an intra-sessional minimum) candles represent a goal for Bears and top (an intra-sessional maximum) a goal for Bulls. If the closing is closer to a maximum the Bulls are closer to a goal. The closing is closer to a minimum the Bears are closer to a goal. Though there are many variations, we will reduce it to 6 types of trade (or candles):
1. The long white candle shows that Bulls managed a ball (trade) during greater time parts.
2. The long black candle shows that Bears managed a ball (trade) during greater time parts.
3. Small candles specify that any of commands couldn’t move a ball and the prices were closed in the same place where have opened.
4. The long bottom shade specifies that Bears managed a ball a game part, but have lost the control by the game end, and Bulls have made impressive return.
5. The long top shade specifies that Bulls supervised a ball a game part, but have lost the control in the end and Bears have made impressive return.
6. Long top and bottom shades specify, as Bears and Bulls were a success during trade, but nobody could keep advantage, therefore it is a drawn game.
Candles don’t reflect sequence of events between opening and closing, only a ratio between opening and closing. The maximum and a minimum are obvious indisputable, but candles (and time fame schedules) can’t tell to us that was in the beginning.
The long white candle assumes that the prices raised the session most part. However, being based on sequence of maxima/minima, session could be more changeable. The example that is seen above represents two possible sequences of maxima/minima which would generate the same candle.
The first sequence shows two small steps and one big movement: small decrease downwards from opening has generated a minimum, sharp increase forms a maximum and small decrease for closing forming.
The second sequence shows three enough sharp movements: strong increase after opening forms a maximum, sharp decrease has generated a minimum and strong increase forms closing. The first sequence displays the strong supported pressure of purchasings and looks more bull. The second sequence reflects the big variability and some flow of offers on sale. These are only two examples, and are hundreds potential combinations which could end with the same candle. Candles offer the valuable information on relative positions of opening, a maximum, a minimum and closing. However, trading activity which forms a separate candle can be various.
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