Figuring out Candlestick Chart Patterns
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One of the traders aids in developing mechanisms of candlestick charts are the candlestick patterns. This can be advantageous when producing simple systems that will update you when a trend is evolving so that you can initiate a trade.
Candlesticks have a formation that demonstrates the open, high, low and closing price of a currency, stock or commodity over a duration. The period covered is generally user selectable.
The ecommended time period is 5 minutes but you may favor in some situations to utilize 15 minutes. For longer term trading you can pick longer periods.
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The body of the candle characterizes the difference between the open and close points. If it’s green/blue (for colored charts) or white then the lower boundaries of the rectangular body is the open and price went higher during the respective period. Should it be black or red in charts with color, the top line indicates the opening market price and during that period, the price moved down.
The wick is the label given to the vertical lines that generally stick up from the top and down from the bottom of the candle body. The highest price ever obtained during the period is the top of the upper wick section. Contrarily, the lowest price is the bottom of the lower wick area.
The blessing of this form of analysis is that the trader can right away see whether prices rose or fell over the period. Bear markets are signified by green or white candles albeit bull markets are illustrated by red or black candles.
The relationship of open and close values to high and low values can be noted quickly. You may have a candle that is conclusively solid, without the wick.
It’s called a Marubozu pattern. Prices never went more or less than the opening and closing prices in this scenario.
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If the body is black or red, the opening market price was the high and the closing value was the low. On the other hand, green or white candle means the low was the opening price while the high was the closing price.
A lengthened body means a relatively consistent movement either up or down. A lengthy wick either top or bottom illustrates a reversal.
In short, to ensure exact trend reading, candlestick must be read within the context of the preceding candlesticks. From there relatively elaborate trends can be built to delineate the trends in the future.
Note: Foreign Exchange investing can be dangerous, can result in substantial losses, and is not appropriate for everyone.