Fundamental Chart Indexes: Candlestick Patterns
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One of the traders accessories in developing formulas of candlestick charts are the candlestick patterns. This can be invaluable when making simple systems that will inform you when a trend is evolving so that you can initiate a trade.
The type of the candlesticks attest the high, low, open and closing price of stocks, currencies or commodities during a given period. This period can be selected by the trader.
Day traders usually choose 5 minutes though 15 minutes can be your option for certain cases. Typically, longer periods are applied for longer term trading.
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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 marked up. Should it be black or red in charts with color, the top border indicates the opening value and during that period, the price descended down.
Vertical lines pointing up from top and down from the bottom are referred to as wicks. The highest value ever accomplished during the period is the top of the upper wick section. On the other hand, the lowest value is the bottom of the lower wick component.
The trader can establish spontaneously the price behavior from this analytical method. Bearish tendencies or rise in price are depicted by green or white candles while bullish temperament or fall in price would be illustrated by red or black candles.
Aside from this, the high and low comparably to open and close prices are rapidly clear. You might have a candle that is conclusively solid, minus the wick.
The name for this is Marubozu pattern. In this event the market prices never went lower or higher than their opening and closing points.
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The opening was the high price & the closing was the lower price if the candle was red or black. Contrarily, 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 direction either downward or upward. A lengthy wick situated on either bottom or top would denote a reversal.
For accurate trend identification a candlestick should be considered in conjunction with the others that preceded it. Then you can fabricate more complex candlestick patterns indicating the probable trends to come.
Note: FX trading can be dangerous, may result in considerable losses, and is not appropriate for everyone.
