How to Read a Candlestick Chart
Candlesticks are visually stunning, colorful patterns that often stand out against the white background of the market. This visual effect is what draws many traders to the strategy of trading on this type of chart. However, you do need to learn a bit about candlesticks before you can become proficient at interpreting them. It helps to know a little bit about interpreting other types of charts, as well, such as the bar chart.
Candlestick patterns are created using what are called candlestick candlesticks. On a standard bar chart, each candle shows the opening and closing price action for that particular time period. For instance, if the investor set the time period to 5 minutes, then a new candle stick would be created every 5 minutes. The color of the candle stick changes depending on the market condition. It becomes red when the price closed higher than it opened, green when it closed lower than it opened, and blue when it opened lower than it opened.
Candlestick charts can be used by novice traders who just want to try out a new strategy or learn how to trade on a different time scale. These charts are also a great way for experienced traders to keep in touch with their less successful counterparts. Traders may use candlesticks as part of their overall trading system. There are many advantages to be had by including these colorful charts in a trader’s toolbox.
One advantage to this type of charting is that the time period on the chart is not limited. A short time frame like a second day chart will display the same information on each candle stick. However, there is not a complete time period on a daily chart. It can only display the prices for a specified number of seconds per day. Therefore, when a longer time period is needed, the graphic designer must create separate charts for each desired period of time.
Another advantage to this type of charting is that it is easy to observe price patterns or formations that occur over time. The price patterns that appear on a daily chart do not always repeat themselves on every succeeding day. Some time-periods have bullish and bearish candle formations. It is possible to make educated guesses about which type of candle formation is about to occur based on the color of each formation.
This type of charting requires that the reader be able to visualize the different color coded candlesticks on the chart. The candlesticks represent price action. The size of each stick shows the size of the formation on the chart. At first glance, this type of chart may appear to use a complex price dynamics system. However, all of the patterns in this chart are easy to identify.
The popularity of candlestick charts has made them available to traders in trading rooms throughout the world. Online brokers provide this type of charting software to subscribers for a nominal monthly fee. The advantage of trading with these types of charting software is that they give a trader a much greater freedom to place trades without worrying about complicated time-frame conversions.
Most of the variations of the double Marubozu method (also known as the double Marubozu system) involve a trading strategy that involves the use of the upper and lower wick at the same time. Upper wick refers to the first small candle that forms after the closing of the previous candle. Lower wick refers to the second large candle. Traders place their orders on the basis of whether the open and the closing prices are equal. They also want to know whether the size of the candle indicates the intensity of the mar