Figuring out Candlestick Chart Patterns
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One of the important indicators that facilitate traders decipher candlestick charts are candlestick patterns. This can be advantageous when producing simple systems that will brief you when a trend is emerging so that you can begin a trade.
The type of the candlesticks refer to the high, low, open and closing price of stocks, currencies or commodities during a specific period. The period covered is generally user selectable.
Day traders generally choose 5 minutes although 15 minutes could be your selection for some cases. Typically, longer periods are exercised for longer term trading.
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The body of the candle characterizes the difference between the open and close points. If it is white (or green/blue on a colored chart) the open is the lower boundary of the rectangular body and the price advanced during the period you are examining. If it is black (or red on a colored chart then the opening price is the top boundary and the price plummeted.
The wick is the label given to the vertical lines that usually stick up from the top and down from the bottom of the candle body. The highest value ever obtained during the period is the top of the upper wick section. On the other hand, the lowest price is the bottom of the lower wick component.
The trader can conclude spontaneously the price behavior from this analytical method. A white or green candle reveals a rising price or bearish tendency and a black or red candle illustrates a dropping price or bullish tendency.
You can also behold at a glance how the highs and lows ascribe to the opening and closing values. Then there is a solid candle devoid of a wick.
This is named as the Marubozu pattern. In this situation the rates never went lower or higher than their opening and closing stands.
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he high value as opening price and low value as closing price is marked by the red or black candle. On the other hand, green or white candle signifies the low was the opening price while the high was the closing price.
A long body means a relatively constant movement either up or down. A lengthened wick either top or bottom denotes a reversal.
In short, to ensure precise trend reading, candlestick must be read within the context of the preceding candlesticks. From there relatively elaborate trends can be built to demonstrate the trends in the future.
Disclaimer: FX investing is speculative, may end up in considerable losses, and is not suited for every person.