Candlesticks are one of the basic tools used in forex trading. They were invented in the 18th century by Japanese rice traders and were used to show the open, close, high and low of price in any given period of time.
Why We Use Forex Candlesticks?
We use candlesticks in our forex trading instead of simple bars because they give a lot more “clues” as to where price may go next. There are 100’s of patterns and books on the subject and there is even a “forex candlestick university” course that will cost you $3000 !
I concentrate on approximately 10 basic candlestick patterns.
What Forex Candlesticks Tell Us
All forex candlesticks and patterns indicate where price should move in the future. This is not an exact science, however these patterns play out more often than not and that’s why they are very powerful tools to use with your trading. The important thing is to be able to recognise these candlestick patterns and know how to use them as “clues” as to whether to take a trade or not.
Important: Candlesticks are only valid when they have closed. Also you can not use candlesticks in isolation. When looking back at historical charts it can appear tempting to believe that they are the only indicator one needs, BUT that is not the case. When used in conjunction with support and resistance and a few other indicators then they are a very valuable part of the forex jig saw puzzle.
Why I Recommend Forex Candlesticks Over Bars
There are a number of options for indicators of price action. I prefer candlesticks as they give better clues in my opinion of where price is going to go next. I use a maximum of 10. If you can thoroughly learn these ten patterns you have enough in your armoury to trade a huge number of systems.
The priority for all of you is to get you into profit as soon as possible by keeping the charts as simple as possible. If you want to study these indicators in more detail then I would suggest you do so only when you have already started to become a profitable trader. As with all indicators candlesticks are more important the larger the time frame, therefore I would place far more importance on a daily, closed candle than a 5 minute one.
I go into much more depth about the different types of forex candlesticks and how to trade them via forexmentorpro service. What’s more, for a limited trial period you can join forexmentorpro for just $1
We can also use forex trendy to find out which Forex pair and time frame is best to trade?