Written by forex trading made ez
One of the traders helpers in developing methods of candlestick charts are the candlestick patterns. They are quite indispensable when one is engaged in the conception of basic systems that will indicate a trend formation so you can begin trading.
The type of the candlesticks attest the high, low, open and closing price of stocks, currencies or commodities during a specific period. You can basically choose the stretch of time that you want to show.
The customary time period is 5 minutes but you may desire in specific situations to take 15 minutes. Typically, longer periods are applied for longer term trading.
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The body of the candle characterizes the difference between the open and close prices. If it’s green/blue (for colored charts) or white then the lower borders of the rectangular body is the open and price went higher during the particular period. A red (for colored charts) or black indicates the upper boundary is the opening price, although the price fell during that period.
Vertical lines poking up from top and down from the bottom are called wicks. The highest price ever accomplished during the period is the top of the upper wick section. Contrastingly, the lowest price is the bottom of the lower wick component.
The trader can conclude spontaneously the price behavior from this analytical method. Bearish tendencies or rise in price are depicted by green or white candles while bullish trends or fall in price would be pointed out by red or black candles.
Aside from this, the high and low comparably to open and close prices are rapidly evident. Then you may have an entirely concrete candle without a wick.
It’s called a Marubozu pattern. This signifies that the opening and closing prices were never approached in either direction by the low and high market values.
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The opening was the high price and the closing was the low price if the candle was red or black. The low price is the open and the close was the high price when the candle is green or white.
A long body indicates a fairly steady direction either downward or upward. A reversal is designated by a long wick on the top or on the bottom.
In short, to ensure accurate trend reading, candlestick must be read within the context of the preceding candlesticks. Then you can devise more complex candlestick patterns indicating the probable trends to come.
Note: FX investing is speculative, can end up in material losses, and is not appropriate for everyone.
