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Reading Japanese candlestick chart not complex

Reading Japanese candlestick chart not complex
Highlights

Financial analysis is supposed to be very complicated. But it calls for two simple things, that is reading charts and reading news.

Financial analysis is supposed to be very complicated. But it calls for two simple things, that is reading charts and reading news.

There are many types of charts like line charts, bar charts and candlestick charts. Candle stick charts are the most popular ones. They consist of red and green candles. Each candle gives information about the price within a specified time interval.

A candle in a 10-minute timeframe indicates its open and close price with its high and low in 10 minutes. The candles are usually lined up and they are the best to visualise the ups and downs of the price and help to spot the potential opportunity to buy or sell.

Every candle has a body and a shadow. The body gives the range between the open price and close price for a specific timeframe.Similarly, the shadow indicates the high and low formed at a timeframe.

Here, Japanese candlesticks are easy to read. A red candle shows that the price is falling and is termed as a bearish candle.

A green candle referred to as a bullish candle signifies an increase in price. If the open price is lower than its close price, then a bullish green candle appears.

If the open price is greater than the close price, a red candle is formed. They are excellent for spotting market patterns.

Some popular candlestick patterns which encourage us to buy are bullish engulfing. Such a candle engulfs the previous candle completely. This pattern is an indication for market turning point.

A hammer is easy to recognise as its name suggest. Its wick or shadow is three times that of its body. It indicates price reversal action and is suggestive of an upward price movement.

Bearish engulfing is the opposite of bullish engulfing. A green candle is completely engulfed by a red candle and suggests possibility of huge price fall.

It generates a sell signal and price action could reverse. A dark cloud cover candle is formed when a green candle is followed by a red candle and its opening is at a new high but close below the middle of the green candle.

A shooting star looks like an inverted hammer and when it appears after an uptrend then it generates a sell signal.

Thus, reading candlesticks is not rocket science. Observe carefully to generate signals in trade.

(The author is a homemaker who dabbles in stock market

investments in free time)

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