Japanese candlesticks are probably most popular way of setting up trading charts. Candlesticks tend to be more informative than average linear chart. While using Japanese candlestick chart you can implement various trading strategies. We present you a profitable strategy for combinations of candlesticks. It time-tested, incredibly efficient method that takes into account all possible price changes. Read on to learn how to recognize emergence of new trends using Japanese candlestick strategy. This Olymp Trade strategy article brings more information about how to utilize Japanese candlestick chart.
What are candlesticks?
This is just a visual representation of price movements over time. It shows the same thing as linear chart, but unlike linear chart it is far more informative. The chart, consisting of Japanese candles, gives visual information about the market mood. If the price after a certain time frame (you set your time frame in trading platform) was higher at the end than in the beginning of that time frame, the candle is bullish. This means that in that time frame price has gone up. Usually this candle will be of green color. Conversely if the price after preset time frame was lower at the end of that time frame than in the beginning of that time frame, the candle is bearish. This means that price has gone down in that time frame. Usually this candle will be of red color. Convenient, clear, effective!
Japanese Candlestick Strategy: What Is The Essence Of This Strategy?
In essence Japanese candlestick combinations can help you notice formation of new trend. For example if market is on downtrend you just need to wait for trend to make a U-turn by observing Japanese candlesticks.
- A trend upwards begins to form from two or more candles of GREEN color (bullish candle).
- A down trend is starting to form from two or more RED candles (bearish candle).
When to open a Call/High binary option? (UP)
Wait for the formation of a reversal pattern: two candles of different color than series of previous candles. In our example, the red candle is absorbed by the green. Green candle closes above the red, as if it is blocking red candle.
When to open a Put/Low binary option? (DOWN)
We are also waiting for the formation of a reversal pattern. In our example, green candle is absorbed by the red. Red candle closes below the green, as if it is blocking green candle.
How to trade according to this strategy? Step-by-step instruction
When in Olymp Trade trading platform, click on the Technical Analysis button. Candlestick chart will appear in new window in front of you. The candlestick chart will show the same asset you have been viewing in previous window (line chart).
On that candlestick chart you need to select a time frame that corresponds to the expected transaction time. By doing that you have chosen the time period for which the price changes will be shown. IMPORTANT! The smallest recommended period is 5 minutes.
Wait for the right moment when candle finally forms and open a new trade.
Japanese Candlestick Strategy – Olymp Trade Recommendations
- Time when you trade, actually the session you are trading in is very important. It is best to start trading during the European session and American session, when there are strong trend movements. You can read more about trading session in our article: Trading by the hour.
- Make sure that time of transaction exactly matches the time-frame of the candles. If you analyze price movement on the 5-minute candle, then the time frame of the transaction should be set to 5 minutes.
- Don’t use bunch of strategies at the same time! If you are using Japanese candlestick strategy you should stick with it. Maybe, just maybe, pair it with one more. Read more about Trend Trading and Ladder Trend Strategy, because those could be suitable to combine with japanese candlestick strategy.
- Don’t let your emotions get the best of you! This strategy like any other is not perfect; you can lose money using it. For example if trends shift very often and suddenly you will be losing money. At times like that it is the best to stop trading for the day and try again tomorrow. Just keep the cool head and keep on trading! Sometimes success is lying just behind a corner, don’t give up before you reach it.
We wish you successful trading!
Japanese Candlestick Strategy – Conclusion
This is one of strategies that should be readily employed by newbies. It is not that hard and it usually yields great results! First, you need to familiarize yourself with the Japanese candlesticks. You need to know very well what they are and how they work. Secondly, you should understand essence of Japanese candlestick strategy to the bone. We hope this article helps you learn a lot. Japanese candlesticks will help you recognize emerging pattern/trend. Once you recognize it you just need to go along with it and place trades in front or that trend. Trends change from time to time, so keep in mind you can’t ride one and the same trend forever, you are bound to lose at least one trade. It’s usually the last one before trend shifts.
Once you understand these things everything is about timing. And timing is something you can learn only by practicing a lot. Best way to practice trading is to open free demo account at Olymp Trade. All you need to do is to click on the button below the text, go over to Olymp Trade web site and create account. You don’t need to deposit any money until you are ready to trade for real. You can read about their demo account in our article: Olymp Trade Demo Account. For more interesting articles on trading strategies you can read our Olymp Trade Strategy series of articles: Binary Gambit, Ladder Trading, Trading By The Hour, Trading With Moving Averages and Trading Metals. If you are looking for more information about Olymp Trade make sure you read our comprehensive Olymp Trade broker review.