What is the most powerful trading indicator, that almost 90% of the traders out there is using? Difficult question - simple answer --- Japanese candlesticks!!
Most of the people use the candlesticks only as a charting system, but their hidden power is coming from the signals they provide us. So to be more specific the candlesticks are showing us an illustration the price movement over the different time frames. What can we learn from this?
It is simple, the price is changing by the people and their emotions - fear and greed! We can say even that the candlesticks are an illustration of the collective human behavior over a specific time frame.
Each candlestick have a open, close, high and low. The most useful information we can get from all of the components is who is winning the battle - the buyers or the sellers. The relationship between the open and close is considered vital information and forms the essence of candlesticks.
So if it is so powerful indicator, why not all of the traders use it?Because it is not simple and it all depends how you interpret the information, it provides us with. There are many patterns which repeats all the time and on a daily chart you can find many candlestick pattern signals but not all of them could be count as a valuable signals. The most important thing is the context of the surrounding of the signal.
One last thing I would like to note is that even they are powerful and reliable indicator not always could be leading to a winning trade even with the right context. The future is unpredictable!