Japanese candlesticks are beginner-friendly – but that doesn’t mean you will encounter no mistakes when trading these candles.
As a matter of fact, its beginner-friendliness makes it more susceptible to misconception, leading you to make these detrimental Japanese candlestick mistakes.
Are you still stuck in a losing streak despite seemingly doing everything right? Check out these 5 common Japanese candlestick trading mistakes.
The market can be noisy, and most of the time, it makes too much noise.
When this happens, the market will create candles all over the place. There will be candles that resemble the ones we’ve previously discussed. You’ll also see a set of candles that makes zero sense.
Why do these candles form? Simple: The market experiences volatility, small price corrections, and other misleading information that distorts the underlying trend.
You can focus on identifying the relevant support and resistance instead. Looking at the key market levels helps you rule out insignificant market data and better understand the primary trend.
Only once you’ve identified the market’s support and resistance can you spot relevant and valid candlestick patterns.
Note: Using the support and resistance level is also beneficial to avoid trading false signals.
You will lose nothing if you look at the bigger picture – you stand on gaining more, actually.
Like any analysis, it’s best to spot and analyze a chart pattern using a wider timeframe. This helps you understand the trend better because you’re looking at the entire market movement.
Why? Because the pattern you’re seeing on a narrow timeframe may be just a random pattern in a wider one. Always rule out irrelevant candlesticks through wide timeframe analysis.
Always rule out irrelevant candlesticks through wide timeframe analysis.
But that doesn’t mean you shouldn’t look at shorter timeframes. Multi-timeframe analysis is always profitable.
Read more: TradersUnited - Monitor Multiple Time Frames to Trade Forex
Balance –this is what you need when you’re trying to spot a profitable candlestick pattern.
Basically, your analysis should always be sound; not too much nor too little.
When you find yourself thinking, “Am I seeing a candlestick pattern here?”
You’re probably not. Remember, these patterns are easy to spot; they don’t try to conceal themselves away from your eyesight.
However, this doesn’t mean you will not try batting an eye on your price chart.
Some single candlestick patterns may form two candles. Dual candlestick patterns can have three candles. So do the triples.
Considering that the forex market is dynamic and complex, you’ll lose if you think that Japanese candlestick patterns formed by the book.
Remember, focus on looking at the behavior of the bulls and the bears to makes sense of the pattern you’re analyzing.
If you live by the idea that Japanese candlesticks are self-confirming, or these candles are self-fulfilling prophecies – you can watch your investment go down the drain.
What should you do to avoid this from happening? You wait patiently for the pattern to be confirmed.
For the duals and triples, decisive candles confirm the trend. These are basically the first candles that form right after the reversal or consolidation and should be similar in color to their signal trend (red if bearish or green if bullish).
For single candles, you can supplement your analysis by looking at other indicators. Another way is to ask the community to confirm the pattern's signal.
Trading with only a single candlestick is like asking the market to just take your hard-earned money.
Why? Because you’re overlooking the overall market trend. If this happens, a market noise may disguise itself as a relevant signal – looking at it would push you to make inaccurate predictions.
Using candlestick patterns effectively involves integrating them with other forms of analysis, like support and resistance and oscillators. This ensures that the future trend you’re seeing is indeed profitable.
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