Interpreting Candlestick Chart Patterns
One of the traders accessories in developing methods of candlestick charts are the candlestick patterns. They are quite essential when one is engaged in the setting up of basic systems that would indicate a trend formation so you can commence trading.
The open, high, low, close rate of the stock, commodity or currency over a period of time is displayed in the candlestick form. The period covered is generally user selectable.
The ecommended time period is 5 minutes but you may favor in particular situations to consume 15 minutes. Usually, longer periods are applied for longer term trading.
The body of the candle points the difference between the open and close values. 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 examining. 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 segment of wick is the highest position that the price ever attained during the period. The bottom of the lower wick is the low.
The blessing of this form of analysis is that the trader can right away see whether prices rose or fell over the period. A white or green candle reveals a rising price or bearish tendency and a black or red candle symbolizes a crumbling price or bullish tendency.
You can also inspect at a glance how the highs and lows apply to the opening and closing values. You could have a candle that is conclusively solid, sans the wick.
It’s called a Marubozu pattern. Prices never went greater or less than the opening and closing prices in this situation.
The opening was the high price & the closing was the lower price if the candle was red or black. The low price would be the open and the close would be the high price when the candle is green or white.
A long body indicates a fairly steady flow either downward or upward. A lengthened wick either top or bottom illustrates a reversal.
A candlestick has to be read along with the previous ones in order to ensure precise trending. From there relatively elaborate trends can be devised to exemplify the trends in the future.