Oddly enough, just like the scented and unscented candles you can buy downtown, Japanese candlesticks come in many different patterns. Only these ones don’t enhance the air you breathe. But knowing how to read them and use them as technical data may go a long way in enhancing your Forex trading career.
As much as this may sound like a toy, the term is actually a descriptive way to identify one of the many different patterns Japanese candlesticks can create. The spinning top formation comes from a candlestick that has a long upper shadow, plus a long lower shadow along with a short body. As pretty as it may sound, a spinning top can tell you something. It is an indication that buyers and sellers were rather indecisive during the session.
You should also pay attention to the location of the spinning top. If it forms as part of an uptrend it could indicate that there was a shortage of buyers and a directional reversal could take place. If the spinning top formed during a downtrend it means the opposite – that there was a shortage of sellers and a directional change could result.
The Marubozu candlestick is very different from spinning tops in more than just name. A Marubozu candlestick is one that has no shadows that extend from the body. There are two very different Marubozu styles. A white one and a black one. The white variety has a long body without shadows. It tells you that the open price was equal to the low price and that the close price was equal to the high price. A black variety is one with a long black body without shadows. It tells you that the open price was equal to the high price and that the close price was equal to the low price.
A Doji candlestick has a very short body because it tells you that the open and close prices were the same. They also indicate that there was a fair deal of indecisiveness between buyers and sellers or possibly that there was a struggle between both in order to gain control of the session. There are also four different kinds of Doji candlesticks.
You could say that a Doji candlestick is sort of like punctuation on a Forex trading chart. That’s because when you spot one it should cause you to pause in much the same manner that a comma with do the same in a sentence. The ‘pause’ that the Doji points to can be one of several things related to the specific trading session.
What this means to you is that Doji candlesticks are telling you that the session was rather intense at times with a lot of back and forth action similar to a football game with both teams evenly matched. For awhile one side gains some ground and then things switch up as the other side gains some ground. With this kind of visual cue, you will be able to identify the kind of activity that took place in a given trading session without having to rely on news reports.