Reading Candlestick Chart Patterns

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One of the key indicators that assist traders decipher candlestick charts are candlestick patterns. This can be invaluable when establishing simple systems that will brief you when a trend is appearing so that you can start a trade.

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

Day traders generally choose 5 minutes however 15 minutes may be your choice for some cases. Longer periods can be picked for longer term trades.

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The candle body indicates the disparity of the close and open points. If it is white (or green/blue on a colored chart) the open is the lower boundary of the rectangular body and the price increased during the period you are reckoning. If it is black (or red on a colored chart then the opening price is the top boundary and the price tumbled.

The wick is the title given to the vertical lines that customarily stick up from the top and down from the bottom of the candle body. he highest spot the price ever hit is the top of the upper wick portion. The low is the bottom of the lower wick.

This style of analysis helps the trader to know at a glance if values slashed or picked up during the analysis time frame. Bearish tendencies or rise in price are evidenced by green or white candles while bullish trends or fall in price would be pointed out by red or black candles.

You can also inspect at a glance how the highs and lows compare to the opening and closing market prices. You could have a candle that is absolutely solid, without the wick.

The name for this is Marubozu pattern. Prices never went higher or less than the opening and closing prices in this case.

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The opening was the high price & the closing was the lower price if the candle was red or black. If it is white or green, the opening value was the low and the closing value was the high.

A relatively even upward or downward trend is defined by a long body. A lengthened wick either top or bottom denotes a reversal.

In summary, to ensure precise trend reading, candlestick must be read within the context of the preceding candlesticks. Then you can devise more complex candlestick patterns signifying the probable trends to come.

Disclaimer: FX investing is speculative, may result in material losses, and is not right for every person.