Friday, July 24th, 2015 by Tim Lanoue
Welcome back everyone! Regardless of the reason why you are here today I would just like to make it known that this article is only part 1 of 6 to come so make sure you stick around to benefit from all 6 parts. With that being said we are going to cover perhaps one of the most important technical topics that could very well dictate your success as a binary options investor.
Now I know some of you may be thinking how can the formation of Japanese Candlesticks and Candlestick patterns dictate your success as a binary options investor? Well the answer to that is quite simple and straightforward. You see what many people fail to realize would be that the formation of certain Japanese candlestick formations are the backbone behind many of the technical analysis based trading strategies applied by traders from all investment industries. Strategies that rely on trends, reversals, breakouts and the break of support and resistance levels are all based off the formation of common Japanese candlestick formations. A better way to understand and appreciate the value of Japanese candlestick formations would be as followed: Japanese candlestick formations are the micro aspect for a technical trading strategy while the actual strategy and technical indicators serve as the macro aspect of the trading strategy. To further break it down, we have order flow which is the summation of all buy and sell orders over any duration of time, then we have Price Action which is the direct derivative of order flow and is directly responsible for the formation of price candles. Then we move forward to candlestick formations and then finally the application of technical trading strategies and technical indicators. In the flow chart below you can grasp a better understanding of this concept.
Now for those of you who aren’t familiar with Japanese Candlesticks I would highly suggest that you read Mike’s Candlestick Charts Guide. Not only does it cover the ins and outs associated with the formation of Japanese candlestick charting but it also serves as a perfect introduction on how to apply candlestick charting with binary options. Once you have read it then I would suggest and recommend that you come back and finish reading Part 1.
Now that you have a better understanding on how Japanese candlesticks are formed and their advantages within the binary options industry let’s move forward! The first type of candlestick we are going to cover today is known as a Marubozu. Marubozu candlesticks are the most common and they are better represented in the image below. As you can see there are two types of Marubozu candles, a bullish and a bearish. A bearish Marubozu candlestick as you may already know indicates to us that the sellers are in control while on the other hand a bullish Marubozu candlestick indicates to us that the buyers are in the control.
The next type of candlestick that we will be covering are known as Spinning Tops. Spinning Tops candlesticks can appear as a bearish or bullish spinning top and they often indicate to investors that market indecision is currently present between the buyers and sellers. As you can see in the image below, Spinning Tops have a small body while their shadows, also known as wicks, appear relatively strong on both the upper and lower end of the candle body. If you see a spinning top candlestick form during an uptrend it often signifies to investors that a bearish reversal is about to occur since the availability of buyers are diminishing and vice versa for a spinning top formation during a downward trend.
The third type of candlestick is perhaps one of the most variable type of candlesticks. Doji Candlesticks are candlesticks that have the same opening and closing price indicating to us that neither the buyers nor sellers were able to establish control. Among the four type of Doji candlesticks would be Long-Legged Doji, Gravestone Doji, Four Price Doji and DragonFly Doji, which are better represented and understood in the picture below. If you see the formation of any one of these four candlesticks during the trend of an asset it often indicates to us that a reversal will more than likely take place.
Understanding common Japanese candlestick formations can greatly enhance your knowledge and success as a binary options investor. Remember the formation of common Japanese candlesticks are the backbone of almost every technical analysis based trading strategy. Without these formations there would be zero technical based trading strategies or approaches. To learn more about Japanese Candlestick formations and what they indicate make sure to stick around for Part 2! As always if you guys have any questions please feel free to leave them below and I will do my best to answer each and every one of them for you! For those of who you are new to this blog as well and enjoyed this article please feel free to become part of our Facebook Signals group. We aren’t just the biggest binary options Facebook community but we are also a family!