What is good about the candlestick charts is that traders can always read about the market’s sentiment. Let’s have a look at the following example of a stock traded from the Western chart trader and a stock traded from a candlestick chart trader.
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Western Chart Trader |
Candlestick Chart Trader |
| Day 1 |
A trader can notice that the currency closed well above the entry price. That is a good start as the trade is rising.
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A trader is advised to enter the currency based on a candlestick pattern entry signal. A trader would be happy with the trade as the price is higher than the entry price, but at the same time be cautious for the reversal signs. |
| Day 2 |
Western papers always only publish the closing price while Japanese papers publish the opening and closing prices. Because of that, after closing price of day 2, most of the traders still happy with their trade as the closing point is still above the entry price, that means still slightly gained some profit. |
A trader noticed the real body has changed into red color, indicating that there was a downtrend although the closing price still above the entry price.
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| Day 3 |
By looking at the closing price, a trader would thought that the trade is still gaining profit (as the closing price still above the entry price) although there is a slightly drop. He would have a thought that it will rise up again on the beginning of next opening session. |
Based on those observations, a trader should notice that the bull market is now ended, and the market trend is changing. |
| Day 4 |
It keeps on dropping on day 4. A trader would start to feel panic and concerned about how to protect the profits. |
It is advisable to sell the stock before the day closing or at the opening session of the next day to lock in those profits. |
| Day 5 |
On the beginning, a trader would sure call his broker to sell at the first opportunity. |
A trader can predict the future market much better by using the candlestick chart as he can use the signals (red or green real body) to foretell the changing sentiments of the market. |
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From that, a conclusion can be drawn is that non profit has been gained from that trading. A trader may make another profit on the next trade. |
The open to close relationship in the candlestick is more effective compare to western line as traders can easily differentiate the bull and bear market from the candlestick charts. |
