The Benefits of Using Candlestick Charts

Filed under: Learn Forex Trading |

Candlestick charts were only introduced to the West relatively recently when Steve Nison conducted extensive research in Japan and helped to translate the various terms and ideas. Now, candlestick charts are featured as an option on most, if not all of modern charting software. However, not everyone is using them, and those who are not might find themselves at a bit of a disadvantage. “Why is this?” you might ask, well, read on…

 

A line chart only tells you the closing price of each day and then connects the dots to give you a rough kind of graph. However, by only using the closing price, you miss out on so much valuable information! What if the price soared during the day, rejected an area of resistance, and then plummeted in the opposite direction and ended up where it started during the open of the market. In a line graph, it would look like not a whole lot is happening. But in a candlestick chart, you can see that the market is very volatile and has given a strong bearish rejection signal.

 

There are also many only signals that you can see on a candlestick chart that you cannot see on a line graph. Engulfing patterns, inside bars, and pin bars are just a few of the patterns that you can see with candlestick charts that you cannot see on a line graph; and they all tell you something important about the market and what is happening among its participants. Trading the markets is all about understand market psychology, and with line graphs, you simply miss out on too much data. So if you are struggling with your trading and are currently using line graphs, why not switch over to candlestick charts? It may just be the help that you need to turn your equity curve around.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>