Essential Chart Barometers: Candlestick Patterns
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One of the traders helpers in developing formulas of candlestick charts are the candlestick patterns. They are quite important when one is engaged in the setting up of basic systems that will indicate a trend formation so you can commence trading.
The open, high, low, close price of the stock, commodity or currency over a period of time is illustrated in the candlestick form. You can basically choose the duration that you want to show.
5 minutes is universal for day traders but you may opt for 15 minutes in some instances. Usually, longer periods are exercised for longer term trading.
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The body of the candle records the difference between the open and close prices. If it is white (or green/blue on a colored chart) the open is the lower boundary of the elliptical body and the price increased during the period you are studying. A red (for colored charts) or black indicates the uppermost boundary is the opening price, whilst the price diminished during that period.
The wick is the tag given to the vertical lines that generally stick up from the top and down from the bottom of the candle body. The top of the upper area of wick is the highest stage that the price ever achieved during the period. The bottom of the lower wick is the low.
The advantage of this form of analysis is that the trader can straight off see whether prices rose or fell over the period. A white or green candle manifests a rising price or bearish tendency and a black or red candle symbolizes a dropping price or bullish tendency.
You can also examine at a glance how the highs and lows compare to the opening and closing market prices. Then there is a solid candle devoid of a wick.
This is known as the Marubozu pattern. Prices never went greater or lower than the opening and closing prices in this scenario.
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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 indicates the low was the opening price while the high was the closing price.
A long body indicates a fairly steady flow either downward or upward. A elongated wick either top or bottom signifies a reversal.
A candlestick has to be read along with the previous ones in order to ensure accurate trending. You then can advance to make more intricate candlestick patterns that will imply probable future trends.
Disclaimer: Foreign Exchange investing can be dangerous, may end up in substantial losses, and is not suited for every person.
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