Figuring out Candlestick Chart Patterns

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One of the traders accessories in developing mechanisms of candlestick charts are the candlestick patterns. Candlestick patterns are valuable for making uncomplicated systems that will advise you regarding the compilation of a trend in order for you to commence trading.

The form of the candlesticks signify the high, low, open and closing price of stocks, currencies or commodities during a specific period. The period covered is typically user selectable.

The customary time period is 5 minutes but you may choose in particular situations to take 15 minutes. For longer duration trading you can opt for longer periods.

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The candle body defines the disparity of the close and open points. If it’s green/blue (for colored charts) or white then the lower bounds of the rectangular body is the open and price went upwards during the particular period. If it is black (or red on a colored chart then the opening price is the top boundary and the price went down.

Vertical lines sticking up from top and down from the bottom are called wicks. The highest price ever obtained during the period is the top of the upper wick section. Contrarily, the lowest rate is the bottom of the lower wick area.

This approach of analysis allows the trader to know at a glance if values tumbled or shot up during the analysis time frame. Bear markets are signified by green or white candles albeit bull markets are represented by red or black candles.

You can also examine at a glance how the highs and lows compare to the opening and closing rates. Then there is a solid candle without a wick.

It’s called a Marubozu pattern. Prices never went higher or lesser than the opening and closing prices in this case.

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The opening was the high price & the closing was the low price if the candle was red or black. If it is white or green, the opening rate was the low and the closing rate was the high.

A long body indicates a fairly steady flow either downward or upward. A reversal is determined by a long wick on the top or on the bottom.

In summary, to ensure precise trend reading, candlestick must be read within the context of the preceding candlesticks. From there relatively complicated trends can be devised to demonstrate the trends in the future.

Note: Foreign Exchange trading is risky, may result in significant losses, and is not suitable for every person.