I. What is the foreign exchange K chart?
K-line is also known as Yin-yang line, stick line, red and black line or candle line. The K-line chart, which originated in the Tokugawa shogunate period, was used by Japanese rice traders to record the market and price fluctuations of the rice market. Later, it was introduced into the stock market and futures market due to its delicate and unique marking method.
At present, this kind of chart analysis is especially popular in China and the whole Southeast Asia.
Since the shape of the chart produced by this method is similar to that of a candle, and the candles are black and white, it is also called a Yin-yang chart.
Through K chart, we can completely record the daily or a certain cycle of market performance. After a period of trading, the stock price will form a special area or form on the chart, and different forms show different meanings.
We can glean some patterns out of these morphological changes.
The K-line pattern can be divided into reverse pattern, finishing pattern, notch and trend line, etc.
So, why is it called “K-line”?
In fact, in Japan’s “K” is not written as “K” word, but written as “ÁL” (Japanese sino-japanese kei), K line is the pronunciation of “ÁL line” K line graph is called “ÁL line”, the west to the first letter in English “K” to “K” line, thereby.
Second, what are the combinations of K diagram?
Here we mainly introduce the three most commonly used combination forms: inversion form (relatively speaking, the reversal signal is the strongest, solid name is inversion form), star shape, reticle.
1, the reverse shape of the hammer line and upper hanging line has obvious characteristics, their lower shadow line is longer, and the entity is small, and in its all-day price range, the entity is near the top of the position.
If these two K-lines appear in the downward trend, it is a signal that the downward trend is coming to an end. In this case, such K-lines are called hammer lines (Figure 1).
If it occurs after an upward move, it indicates that the previous market rally may have ended, then this K line is called the upper line (Figure 2).
Figure 1 Hammer line 2 Upper hanging line There are three main criteria to judge whether K line is hammer line and upper hanging line: the entity is at the upper end of the whole price range, and the color of the entity itself is indifferent;
The length of the shadow line should be at least 2 times of the solid height;
In this type of K line, there should be no overcast line, and even if there is overcast line, its length is very short.
In Figure 3, the bullish engulf pattern, the market was in a downtrend, but then a firm white entity appeared and swallowed the black one in front of it.
This signals a bottom reversal.
Figure 4 shows the bearish engulf pattern. In the figure below, the market was trending toward a higher price, but now a white entity is swallowed by a black entity, which constitutes the signal of a top reversal.
Figure 4 Bearish engulf pattern To determine whether the K-line combination is bullish or bearish engulf pattern, there are three main criteria: Before the engulf pattern, the market must be in a clear upward or downward trend;
The engulfing form must be composed of 2 K-lines, in which the entity of the second K-line must cover the entity of the first K-line;
The second entity of the engulfing form is the opposite color of the first entity.
(The first K-wire has to be so small that it almost constitutes a crosshair).
The common denominator of such forms is that they all contain a star K line, the star line entity is small, and there is a price gap between its entity and the larger K line entity in front of it (as long as the star line entity does not overlap with the previous entity, then the star line is valid).
The color of the star line itself is not important. The star line can appear at either the top or the bottom of the market. If the solid star line has been reduced to a crosshair, it is called a crosshair.
Here we mainly introduce the three most commonly used forms: evening star, Dawn star, cross star.
¡ñ Starlight and Evening star Figure 5 is Starlight form, which belongs to the bottom inversion form.
In this form, there is first a long black substance, then a small substance, and between the two forms a downward air, and on the third day there is a white substance, which clearly pushes upward into the black substance of the first day.
Figure 6 is the Evening Star, which is in the top inversion form.
In this form there is first a long white entity, then a small entity, and between these two entities an upward jump is formed, and the third is a long black entity, which plunges sharply downward into the white entity of the first day.
FIG. 5 Star Shape FIG. 6 Evening Star Shape Note the above: In the evening star shape, a price jump should be formed first between the first and second entities, and then another price jump should be formed between the second and third entities.
However, according to the practical situation, the second jump is not common, and for the evening Star, it is optional, not necessary.
¡ñ Crosshair and crosshair are called crosshair if there is a crosshair in the upward trend, and the crosshair forms an upward price jump between the previous entity, or there is a crosshair in the downward trend, and the crosshair forms a downward price jump between the previous entity.
Specifically, in the downtrend, the bottom-reversal signal is verified by the third K-line if it is followed by a cross after a black entity, and the third K-line is a strong white K-line, and its closing price significantly crosses upward into the first black entity. This pattern is called the cross star pattern (FIG. 7).
Figure 7. In the upward trend, if the cross is followed by a long black entity, and its closing price is deeply inserted into the inside of the white entity before the cross, then this black entity constitutes the verification signal of the reversal process of the market top. Such a shape is called the cross evening star shape (Figure 8).
Figure 8 Crosshairs Crosshairs Crosshairs are a special class of K-lines whose opening and closing prices are at the same level.
Figure 9 – Figure 11 below shows various examples of cross K lines.
Figure 9 Crosshair 10 Crosshair 11 Tombstone Crosshair On a perfect crosshair, the opening price is at the same level as the closing price, but there is a degree of flexibility in this criterion. If the opening price of a K-line is only a few base price units different from the closing price, the K-line can still be considered a crosshair.
The crosshair is a remarkable trend reversal signal. If the K line after the crosshair sends out a verification signal, confirming its reversal signal, it further increases the possibility of trend reversal.
It should also be pointed out that crosshair is of great significance only in a market where crosshair does not appear frequently.
