Sunday, June 14, 2009
The Power of Candlesticks
I am currently studying Candlestick charting. Candlesticks are a way to represent the data on investment charts, including commodities, stocks and even Forex. They were invented over 400 years ago but then usage of candlesticks is still not so prominent. Sure, online Forex platforms all have candlesticks embedded in them but then traders usually rely more on their indicators. But Candlesticks can do a lot more than what indicators can do.
The most important reason I will always pay close attention to candlesticks is that candlesticks provide a faster prediction of the future compared to indicators. Let me just give you an example. 2nd week of June 2009. The USDCAD was going straight down, according to my indicators RSI and EMA lines. But all 5 days of USDCAD showed me strange candlestick patterns indicating that there could be a reversal, especially Wednesday and Thursday. So I closed my short position for a loss of about 100 pips, following what the candlestick signals tell me. Sure enough, on Friday, the price shot up a few hundred more pips. If I hadn’t closed the position, I would have lost 4-5 times more!
I have still a long way to go till I master candlesticks, but I will happily take on that journey as it would be worthwhile.
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