Investment Analysis can be divided into two basic types: Fundamental Analysis and Technical Analysis. This section will discuss the important issues in understanding Technical Analysis. With the aim of predicting future trends, Technical Analysis incorporates price charts and/or technical indicators for analysing previous trends to predict future market prices.

Before delving into Technical Analysis applications and techniques, investors should understand the following assumptions.

Main assumptions:

1. Price reflects all market behaviour.
2. Prices will occur in patterns.
3. History will continue to repeat itself.

Three Major Analysis Techniques:

1. Candlestick Charts
2. Chart Patterns
3. Trading Indicators

Candlestick Charts are formed by plotting the opening, highest, lowest and closing price of a specified time frame, with the body of the candles denoting the difference between the opening and closing prices, and the shadow of the candles denoting the highest and lowest prices.

Candlestick Charts can be generally divided into Monthly Candlestick Chart, Weekly Candlestick Chart, Daily Candlestick Chart and Minute Candlestick Charts.

The body of the candles can be divided into “White Candles” and “Black Candles”. White Candles are generally red or white, while Black Candles are usually green or black. When the opening price is lower than the closing price, the Candlestick Chart will be represented in the form of a White Candle; When the opening price is higher than the closing price, it will be represented as a Black Candle. If they are the same, the shape is called Doji.

When the Candlestick Chart is represented in the form of a White Candle, the thin line between the highest price and the closing price is called the upper shadow. The thin line between the lowest price and the opening price is called the lower shadow. The bar between the opening price and the closing price is called the real body.

If the colour of the Candlestick Chart is red (or white), the closing price is higher than the opening price. If the colour of the Candlestick Chart is green (or black), the closing price is lower than the opening price.

The candlestick chart can be divided according to the period of time, for example, every minute, every day, every week, every month or even every year.

Weekly Candlestick Charts are plotted with the opening price on Monday, and with the closing price on Friday. The highest price and the lowest price of the week are also plotted on that one Weekly Candlestick.

Monthly Candlestick Charts are plotted with the opening price of the first trading day of the month and the closing price of the last trading day, together with the highest price and the lowest price of the month.

Annual Candlestick Charts are plotted with the opening price of the first trading day of the year, the closing price of the last trading day, also with the highest price and the lowest price of the year.

For most of the investors, Weekly Candlestick Chart and Monthly Candlestick Chart and other long term intervals are generally used for analysing the market trends and conditions.

For short-term investors, 1-minute, 5-minute and 15-minute intervals Candlestick Charts are provided in the MT4 client software.

Candlestick Patterns
1. A White Marubozu is a long white body with no shadows which indicates a bullish trend. It usually becomes the first part of a bullish continuation or a bullish reversal pattern.
2. This candle shows that the close price is lower than the period high. In this case, the high price may indicate resistance, where a number of sellers executing their short positions.
3. This candle shows that the open price is higher than the period low. In this case, period low indicates support, where a number of buyers executing their long positions.
4. This candle shows uncertainty.
5. This candle shows uncertainty.
6. The Spinning Tops have longer shadow than the real body. The colours of the real bodies are not very important.
7. The pattern indicates the indecision between the bullish and bearish trends.Hammer candlesticks form when a price movement goes significantly lower after the open, but rallies to the close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer.
8. The Inverted Hammer is a pattern that occurs at the bottom of a downtrend. It indicates a possibility of the reversal of the downtrend.
9. A Black Marubozu is a long black body with no shadows. It usually implies bearish continuation or bearish reversal.
10. This candle shows that the open price is lower than the period high. In this case, the high price may indicate resistance, where a number of sellers executing their short positions.
11. This candle shows that the close price is higher than the period low. In this case, the low price may indicate support, where a number of buyers executing their long positions.
12. This candle shows uncertainty.
13. This candle shows uncertainty.
14. The Spinning Tops have longer shadow than the real body. The colours of the real bodies are not very important. The pattern indicates the indecision between the bullish and bearish trends.
15. Hammer candlesticks form when a price movement goes significantly lower after the open, but rallies to the close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer.
16. Shooting star.
17. Four Price Doji. All the open price, high price, low price and close price are the same for a trading day. It's a very unique line indicating the indecision of the traders, or a very quiet market.
18. Dragonfly Doji: A Doji where the open and close price are at the high of the day. Like other Doji days, this one normally appears at the market turning points.
19. The Gravestone Doji is formed when the open and the close prices occur at the low of the day. It is found occasionally at the market bottoms. The name, Gravestone Doji, is derived by the formation of the signal looking like a gravestone.
20. A Doji is formed when the open and the close price are the same or very close. The lengths of the shadows are not important. The Japanese interpretation is that the bulls and the bears are conflicting. The appearance of a Doji should alert the investor of major indecision.

If you can read the candlestick charts, then you can understand market trends. And if you already know as many as 20 or more candlestick patterns before entering a trade, then you should be able to further capitalize on the gold market.