How to Read the Candlestick Chart
Candlestick charts are perhaps the most favorite tool for traders. They are equally used in work by experienced players and novice traders. Moreover, candlestick chart analysis is recommended both in Forex trading and in binary options trading.
You have probably seen more than once what a candlestick chart looks like, even if you had no idea about its name. Confusing it with other graphical tools is quite difficult.
If in the line chart we see only the line connecting the points, in the bar chart – bars of several points, then the candlestick chart consists of candles – the main elements that determine the analysis.
Easy-to-read candlestick charts provide much more information when analyzing than other types of Forex charts.
The basis for building a candlestick chart is candles. They can be of different sizes and colors, which facilitates an understanding of the market situation. Each candle reflects one selected trading period.
Each candle gives when reading correctly, quite extensive information.
Each candle consists of a body and a shadow of a different size.
The body shows the level of opening and closing of the period. If a period of 15 minutes is set, one candle will equal this period.
The shadows above and below the candles show us the maximum and minimum prices of the same period.
The open price is determined by the bottom or top of the candle. It depends on how she will move for 5 minutes. As the price increases, the candle changes color to green or white, and the open price is indicated at the bottom. When the value drops, the price is displayed on the top of the candle, and that changes its color to red or black.
The gray shadow above the candle determines the high price. If the opening or close prices were the highest, then the shadow does not appear.
Similarly, at a high price. A gray shadow appears at the bottom of the candle or does not appear at all if the opening or closing prices were the highest.
The close price is displayed at the top of the candle if it was green or white, and, accordingly, at the bottom of the candle was red or black.
Colors of candles +
Candle color is also of particular importance, making it easier to read the chart. Candles can be red (bearish) and green (bullish), which, in turn, means that the price is either falling or rising. The length of the candles is also important for analysis:
The longer the bullish candle, the greater the pressure of the actions of buyers in comparison with the actions of sellers.
The longer the bearish candle, the greater the pressure of sellers in comparison with the actions of buyers.
Separately, it is worth analyzing the situation when a Doji candle appears on the chart. There is even a trading strategy of the same name, based on the value of this candle.
A Doji candle is a candle with approximately the same opening and closing price, while the body of the candle is petite. The appearance of a Doji candlestick on the chart indicates that the market is in a period of uncertainty. Besides, the Doji on the chart with a high probability signals a possible market turn after a rapid movement in a certain direction.
Many trading strategies rely on work according to the candlestick schedule. Knowing how to trade on a candlestick chart, you can easily learn to read tick charts and other options for graphically displaying price changes.