Japanese candlesticks description
The Japanese candlesticks chart reveals a series of candles in different colours and sizes. There are red, bearish candles and green, bullish ones. Some are big, some are small. Some have long shadows on one or both sides, some have none. What does it mean?
A candle that has 2 wicks informs traders that the price comes with a confusing and hard to capture course. A long wick means firm price rejection in the shadow’s direction.
A Japanese candlestick with a shadow produces a trading signal in two situations. When the price moves sideways and hits the support/resistance level and when the price breaks out of this level, forms a trend and again tests the level.
Trading with the shadows of the candles on the Quotex platform
You must be logged in to your Quotex account and have a financial instrument chosen. Set the Japanese candlesticks type of the chart and the candles period for 5 minutes. Invest 1-5% of your general capital at maximum. The duration of your trades should be as long as the candles period.
You open a transaction when the meaningful levels are reached by the price. As I have mentioned before, there are two situations when you can use the shadows of the candles to enter the trade. You can use pending orders on the levels defined by shadows. Let’s discuss it on the examples.
Case number one – the price moves sideways
Draw the support or resistance line when the price goes sideways. They will constitute the zones of strong price reversal which is shown by the appearance of the shadows.
Below, you will find the eurodollar chart with the support level added. It was touched by the candle with a long downward shadow. It gives you a signal to open a buy position.
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| Buying on the support level defined by a long lower shadow |
The next graph is showing the opposite situation. The candle with the long upward shadow appears on the resistance level. Open a short trade here.
You are using a 5-minute chart so your trades should last also 5 minutes.
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| Selling on the resistance level defined by a long upper shadow |
Case number 2 – a breakout of the meaningful zones
You wait for the breakout of the support or resistance levels. A new trend is most probably forming. You should concentrate your attention on the candle that appears after the occurrence of the breakout.
On the chart beneath there is a resistance line drawn. Then, a bullish candle with the upper shadow breaks it out. Enter the position when the price retest the resistance level.
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| Buying after the breakout of resistance level |
You should open a short position when the price touches the preceding downward candlestick shadow that stands nearest to the point of the breakout.
Summary
The strategy for trading fixed time trades with the use of candlestick shadows is quite safe and effective. First, there are plenty of candles with wicks on the Japanese candlestick chart. This gives you many opportunities to get into profitable trades. Second, the win rate for the case where you use the breakout of the meaningful zones is relatively high. This is because this is a well-known price retest behaviour. Third, you can get good results with a solid money management plan. As I said, invest no more than 1-5% of your capital in a single trade and keep the transaction open for a duration of one candle.
As you can see, this strategy is not only easy to use but also effective. To check it for yourself, go to the Quotex demo account now. Practice as long as you need to and move to the real account afterwards. Tell us in the comments section what is your opinion about the 5-minute candlestick shadow strategy for fixed time trades at Quotex.