Entering the stock market as a trader can be an intimidating experience; a plethora of charts, strategies and indicators can become very intimidating very quickly. Fret not, Japanese Candlesticks are your Knight in the shining armor. Japanese Candlesticks were invented by the legendary Japanese trader Honma Munehisa. Candlesticks are a visual price analysis technique to comprehend data and make appropriate decisions. Here is a diagram of bullish and bearish candlesticks.
Bullish Candle:- Bullish candles are green in color which signifies a bullish trend in the market i.e. Closing price is greater than the opening price.
Bearish Candle:- Bearish candles are red in color which signifies a bearish trend in the market i.e. Closing price is less than the opening price.
Here we are sharing the basic Japanese Candlestick trading technique Tower Top and Bottom.
Tower Top formation is the one where a period of bullish uptrend is reversed. This occurs at high price levels. Here large bullish(green) candles are followed by bearish(red) candles or Doji (i.e. Indecisive candle) with another bearish candle serving as a confirmation. This is a good SELL signal.
Tower Bottom formation is the one where a period of bearish downtrend is reversed. This occurs at low price levels. Here large bearish(red) candles are followed by bullish (green) candles or Doji (i.e. Indecisive candle) with another bullish candle serving as a confirmation. This is a good BUY signal.
So there you have it! Tower Top and Bottom technique is a good trading strategy using Japanese Candlesticks. Now all is left is to master it!