Candlesticks analysis as a part of successful trading in the Forex market

As a matter of fact, the Forex market is a platform for currency trading. Financial institutions such as insurance companies, central banks, other organizations, and individual traders are major players in the market.

Candle analysis is a type of technical analysis, which is used in trading. This method was invented for analysis of price dynamics on the rice exchange in Japan.

Candlesticks analysis as a part of successful trading in the Forex market

What the method of candlesticks analysis is based on

The method is based on the systematization in the form of a graphic image of a candle. In this candle, the shadows are the maximum and minimum price, and the candle body is the opening price and closing price over a certain period of time. To analyze the dynamics of prices, separate candles are used as well as their combinations.

Factors of candlesticks analysis

In the modern world, use of the Japanese technical analysis is not effective because of impact of numerous factors on the price changes. Modern traders combine East analysis tools (candlesticks analysis) with Western methods for successful work.

It means that one needs to combine the analysis of candles, for example, with indicators and oscillators to predict the future price trend and time of entry and exit from the transaction. These indicators and oscillators are:

  • moving average;
  • levels of support/resistance;
  • volumes;
  • Ichimoku trend indicator;
  • Bollinger bands, etc.

Undoubtedly, it helps traders to find the points of enter and exit from trading positions. In general, a combination of any of the three components is enough for successful activity. For example, Japanese candles can be combined with levels of support and resistance and trend indicator.

The risk of candlestick analysis use

It is important to note that the use of the above-mentioned analysis methods is no guarantee of profitable trades. It is important to understand that the trading market is a very risky activity since it is influenced by numerous economic factors that are hard to predict from the technical analysis point of view.
Intentional speculations by big professional players are also risk factors of this analysis type. Well-known speculative transaction against the British currency carried out by George Soros can be an example of significant losses for the economy of UK. These are cases where no type of analysis can be trusted, so that one should not blindly rely on them.
For successful Forex trading, only the use of technical tools such as candlestick analysis and other methods is not sufficient. A trader needs to correctly interpret large amounts of information and possess certain traits of temper: logical thinking, perseverance, and patience.

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