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Posted by tfsguru on July 28th, 2010 | tags:
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Candlestick patterns are basic indicators that benefit a trader to define candlestick charts. They are quite essential when one is engaged in the conception of basic systems that will indicate a trend formation so you can begin trading.
Candlesticks have a structure that demonstrates the open, high, low and closing price of a currency, stock or commodity over a time frame. This period can be chosen by the trader.
5 minutes is routine for day traders but you might pick 15 minutes in some instances. For longer period trading you can choose longer periods.
The candle body defines the disparity of the close and open points. If it’s a white or blue / green on charts with color, the lower body is the open and while you were considering it, the market price moved up. A red (for colored charts) or black indicates the uppermost boundary is the opening price, whilst the price fell during that period.
The wick is the label 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 position that the price ever hit during the period. The bottom of the lower wick is the low.
The trader can decide directly 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 signifies a crumbling price or bullish tendency.
The association of open and close values to high and low values can be discerned quickly. Then you may have an absolutely definite candle without a wick.
The name for this is Marubozu pattern. In this scenario the market prices never went lower or higher than their opening and closing stance.
he high value as opening price and low value as closing price is designated by the red or black candle. Contrarily, green or white candle signifies the low was the opening price while the high was the closing price.
A lengthened body means a relatively consistent movement either up or down. A lengthy wick detected on either bottom or top would imply a reversal.
A candlestick has to be read along with the previous ones in order to ensure accurate trending. You then can go ahead to make more thorough candlestick patterns that will imply probable future trends.
Note: Forex trading is not risk free, may end up in significant losses, and is not appropriate for every person.
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