Basics of Candlestick Chart Patterns

Tuesday, February 23rd, 2010 | local info

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Candlestick patterns are customary indicators that abet a trader to investigate candlestick charts. This can be accessible when producing simple systems that will inform you when a trend is emerging so that you can initiate a trade.

Candlesticks have a structure that displays the open, high, low and closing price of a currency, stock or commodity over a stretch of time. The period covered is typically user selectable.

Day traders typically choose 5 minutes although 15 minutes could be your choice for certain cases. Usually, longer periods are exercised for longer term trading.

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The body of the candle points the difference between the open and close prices. 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. If it is black (or red on a colored chart then the opening price is the top boundary and the price went down.

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 spot that the price ever hit during the period. The bottom of the lower wick is the low.

This kind of analysis allows the trader to know at a glance if values tumbled or picked up during the analysis time frame. A white or green candle reveals a rising price or bearish tendency and a black or red candle illustrates a abating price or bullish tendency.

You can also behold at a glance how the highs and lows ascribe to the opening and closing rates. Then you may have an absolutely concrete candle without a wick.

It’s called a Marubozu pattern. In this situation the rates never went lower or higher than their opening and closing points.

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If the candle is black or red, the opening rate was the high and the closing value was the low. If it is white or green, the opening market price was the low and the closing market price was the high.

A relatively uniform upward or downward trend is indicated by a long body. A reversal is designated by a long wick on the top or on the bottom.

For accurate trend identification a candlestick needs to be considered in conjunction with the others that preceded it. You then can go ahead to make more detailed candlestick patterns that will signify probable future trends.

Disclaimer: FX trading can be dangerous, may result in considerable losses, and is not suited for everybody.

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