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Japanese Candlestick charts are one of the oldest type of charts used for price prediction
Candlestick patterns are extremely effective when interpreted properly, and some patterns are up to a 90% accurate in predicting which way a market is going.
Candle stick patterns are not so affective when trading against the major trend, sometimes they do correctly forecast reversals of the major trend, but more often than not, the major trend resumes after undergoing a correction or period of congestion.
Although Japanese candlestick charts have become very popular in the west over the past several years, some candlestick patterns are understood better than others. Many traders who make use of a few simple candlestick patterns haven't mastered more complex patterns those that develop over the course of several trading periods. However, consistent application of candlestick patterns especially when used in conjunction with Western technical analysis methods has helped many traders in turning a consistent profit.
A large number of Candlestick patterns are based on the relationship of the prior bar's closing price and the new bar's opening price. Though a single candlestick is very informative in and of itself, multiple candles often combine to form more powerful patterns.
Although I do not have sufficient space here to explain every candlestick pattern I would like to briefly talk about one of my favorites, the Doji. Doji's are not very significant by themselves, but if a Doji occurs after a large candle a stronger signal is generated. A Doji is formed when the open and the close are the same or very close. The Gravestone Doji is formed when the open and the close occur at the low of the day. These patterns are more powerful than you may ever know! I highly recommend that you look into using them in your trading if you don't already.
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