Japanese candle chart analysis, so called because the lines resemble candles, have been refined by generations of use in the Far East. These charts are now used internationally by traders, investors and premier financial institutions. (See my recent article on the 10 types of candle stick patterns).
There are 4 advantages to using candle charts in your every day approach to trading and I’ve outlined them on the following pages:
They are easy to understand
Anyone, from the first-time chartist to the seasoned professional can easily harness the power of candle charts. This is because, as will be shown later, the same data required to draw a bar chart (high, low, open and close) is used for a candle chart.
New to candle stick charts? Check out my free video on reading candle charts here.
They provide earlier indications of market turns.
Candle charts can send out reversal signals in a few sessions, rather than the weeks often needed for a bar chart reversal signal. Thus, market turns with candle charts will frequently be in advance of traditional indicators. This will help you to enter and exit the market with better timing.
Candle Charts furnish unique market insights
Candle charts not only show the trend of the move, as does a bar chart, but, unlike bar charts, candle charts also show the force underpinning the move.
They enhance Western charting analysis
Any Western technical tool you now use can also be used on a candle chart. Candle charts, however, will give you timing and trading benefits not available with bar charts. This merging of Eastern and Western analysis will give you a jump on those who use only traditional Western charting techniques.