Japanese Candlesticks - How Japanese Candlesticks Give You a Trading Edge

You have most likely heard of Japanese candlesticks before, but might not realize just how useful and extremely effective they can be for a trader. Japanese candlesticks can give you an immense edge over your competition, regardless of the market or instrument you trade. This charting style began in Japan in the 1700's and spread quickly around the world starting about 25 years ago as traders realized the advantage of using them to plot charts. Traders who use these kinds of candlesticks on their charts can quickly see the power that they offer to those who understand them and the insights that they can give a trader into market sentiment.

Perhaps the biggest advantage to a trader who uses Japanese candlesticks is that they allow you to understand and gauge the sentiment of the market. Other charting styles lack this feature as they are nothing more than straight lines plotted on a chart. These lines make it extremely difficult for new traders to get any kind of feel about the sentiment of the players in the market and what price may do in the near future. Japanese candlesticks allow you to see at a glance if the buyers had power, the sellers had power, a combination of the two and much more. Being able to read or have an insight into the sentiment of the market gives you a massive edge regardless of the market you trade. Why? Knowing the sentiment of the market allows you to know in advance what future price movement may be and where price may go. Knowing what may happen in the future in advance allows you to prepare and modify you trades before price has even begun to move, allowing you to get into position early and repeat more profits from the market. This gives you a massive trading edge over other traders.

The second advantage of using Japanese candlesticks is that they in themselves can be used to signal potential trade setups. Many traders rely on indicators such as moving averages to enter and exit trades. These indicators are useful, but they themselves are based on price. Being able to read and understand Japanese candlesticks means that many traders use nothing more than price to know when a potential trade entry or signal may be forming. They no longer need or rely less on other indicators. The way in which they are drawn and how they allow a trader to gauge sentiment of the market makes it easy for a trader who can read and understand them to see when potential trades are setting up. Knowing that the buyers have control may warn that any short or sell trade you have open may be at risk and you should close out to profit your profits. In turn, knowing the buyers have gained control may signal an excellent opportunity to enter in a buy trade and go long with the upcoming market movement.

Japanese candlesticks can give you a massive trading edge by knowing in advance where price may move and being able to gauge market sentiment and have a feel of what other traders may be thinking. They are a tried and tested charting style and today are used by many bank and professional traders with profitable results.

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