In forex trading, we use indicators and rabbits feet, EAs and blind faith to inform our trading strategy. Me, I’m arriving a little late to the chart party.
Line chart, bar chart and candlestick chart are those patterns mostly used in trading, and right now I’m looking into the possibilities of Japanese candlestick patterns.
A candle actually tells us a lot of things about the sentiment of the market – which is not something I would have expected from this level of technical analysis.
Having said that, I need to know which direction (trend or sentiment) the market is going to take or has already taken, so being able to interpret which way the wax is melting is an aid to my trading strategy.
For example, if there is a long-legged pint obeying support, we can easily assume that market is going to on ‘buy’, since sellers have come out with their profit and this is the reason why there has been a long leg (now you know where the name ‘long john silver’ came from, originally. I made that last bit up…)
There are other candlestick formations, such as doji, bullish, bearish, morning star, evening star, spinning top, hammer etc.