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Forex charts: Algorithms of Japanese candlesticks

Posted on July 17th, 2008 by admin, under Forex Signals.

Forex charts: Algorithms of Japanese candlesticks.

Algorithm of calculation of a white candle.

The scenario may be white, and black top candle closes, and the candle will be closed by a black top if on Friday there will be an fundamental analysis information good for dollar, and the price will go downwards badly. In this case instead of a white candle we’ll get a black top, but the scenario of development of a week candle will still remain white.

Algorithm of calculation of a black candle.

If calculation has shown that the candle should be white, and in practice it has closed by a black top, algorithm of price movement still remained white.

Calculation of a candle is not stagnant. It requires constant refinement depending on what calculation of price movement was the initial one and whether the price on this algorithm goes in real time (see fig. below).

For example, the trader works on week schedules, and calculation gave the following settlement white candle. Work should be done then in the following order.

According to the algorithm of white candles on Monday the price should come to the check point 2. After that, by Friday it should reach the check point 3 and, finally, the week closes at a check point 4. But very often price on Monday comes not to the settlement point 2, but to the point 5, or on Tuesday to the point 8. After Monday (Tuesday) it is necessary to make correction of calculation (to wait the bottom point: 2, 6 or 9) from a point 5 (or after Tuesday from a point 8). If the check point 2 has not been reached, it is necessary to expect check points 6 or 9, and only after achievement of points 2, 6, 9, it is possible to start to work upwards. No matter when the price will reach the top check point, by the end of Thursday (a point 3) or in the middle of Friday (point 7). It is necessary to close here (after reaching the top point), and to try to work downwards (risk work).

Let’s assume that calculation resulted the following week candle white, with long shadows, then in calculating for daily candle for Monday heavy graph will provide bottom work for all indicators despite the fact that the overall calculation of the week gave a white candle. This applies to Friday also.

In calculating the first and/or last week of the month, it is necessary to keep in mind that this week must be calculated twice. First, in view of calculations of the last month, and, secondly, in view of calculations for new month.