Primary Chart Guides: Candlestick Patterns

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One of the important indicators that facilitate traders understand candlestick charts are candlestick patterns. Candlestick patterns are helpful for making effortless systems that will advise you regarding the evolution of a trend in order for you to begin trading.

The shape of the candlesticks attest the high, low, open and closing price of stocks, currencies or commodities during a specific period. You can basically choose the time frame that you want to show.

The ecommended time period is 5 minutes but you may favor in specific situations to take 15 minutes. Longer periods may be chosen for longer term trades.

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The body of the candle characterizes 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 elongated body and the price increased during the period you are studying. A red (for colored charts) or black indicates the top boundary is the opening price, while the price diminished during that period.

In candles, vertical lines pointing up from the top and down from the bottom are called wicks. The top of the upper part of wick is the highest stage that the price ever hit during the period. The bottom of the lower wick is the low.

The trader can conclude directly the price behavior from this analytical method. A white or green candle exposes a rising price or bearish tendency and a black or red candle signifies a dropping price or bullish tendency.

The association of open and close values to high and low values can be examined spontaneously. Then you may have an evidently concrete candle without a wick.

The name for this is Marubozu pattern. This means that the opening and closing prices were never approached in either direction by the low and high market values.

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The opening was the high price and the closing was the reduced price if the candle was red or black. Adversely, green or white candle means the low was the opening price while the high was the closing price.

A long body indicates a fairly steady direction either downward or upward. A lengthy wick detected on either bottom or top would imply a reversal.

For accurate trend identification a candlestick should be studied in conjunction with the others that preceded it. You then can go ahead to make more thorough candlestick patterns that will denote probable future trends.

Notice: Forex investing is risky, can end up in significant losses, and is not appropriate for everybody.