Forex Trading

Easy Ways to Read a Candlestick Chart: 12 Steps with Pictures

How to Read Candlestick Charts

A candlestick chart reflects a given time period and provides information on the price’s open, high, low, and close during that time. A bearish harami cross occurs in an uptrend, where an up candle is followed by a doji—the session where the candlestick has a virtually equal open and close. Candlestick charts show that emotion by visually representing the size of price moves with different colors. Traders use the candlesticks to make trading decisions based on regularly occurring patterns that help forecast the short-term direction of the price.

What is candle strategy?

Candlestick trading is a strategy in which the price on the previous 'n' candlesticks is observed and then you decide your next trade on the basis of that observation. Hence, if the price is increasing continuously for say, 3 candlesticks, then it is highly probable that it will rise further.

The hammer candle has a lower shadow that makes a new low in the downtrend sequence and then closes back up near or above the open. The lower shadow (also called a tail) must be at least two or more times the size of the body. This represents the longs that finally threw in the towel and stopped out as shorts start covering their positions and bargain hunters come in off the fence. To confirm the hammer candle, it is important for the next candle to close above the low of the hammer candle and preferably above the body.

Bearish harami and harami cross pattern

The opposite of this pattern is the evening star, which is the bearish version signalling an uptrend into a downtrend. The hammer pattern occurs on a candlestick chart when the trades are significantly lower than the opening, but will rally within that time period to close near How to Read Candlestick Charts the opening price. When the candle forms at the start of a new trading period it is constantly changing as the price moves up and down. During this time the candlestick can change colours from green to red until the time period ends with the last price which is the close price.

Neither bulls nor bears were able to gain control and a turning point could be developing. Candlestick charts are seen almost everywhere due to the increasing popularity of cryptocurrencies and stock trading. In this article, we are going to explore the key components of a candlestick chart and what they indicate. Additionally, we are going to discuss how to read such charts and how you can use this information for your benefit. A bearish engulfing pattern, on the other hand, shows the possibility of the market being taken over by the bears.

Morning star reversal pattern

Candlestick charts are an effective way of visualizing price movements invented by a Japanese rice trader in the 1700s. It is a candle that has an extremely short body (well, no real body to speak of, actually), and if it appears after a steady downtrend/uptrend, it can signify a reversal. Candlestick charts are comprised of a collection of multiple candles, and each of them represents a predetermined period of time.

How to Read Candlestick Charts

No candle pattern predicts the resulting market direction with complete accuracy. Whenever making trading decisions based on technical analysis, it’s usually a good idea to look for confirming indications from multiple sources. It consists of a bearish candle followed by a bullish candle that engulfs the first candle.

Spinning top pattern

The three white soldiers are used to predict a reversal of the current downtrend on a candlestick chart. There are three consecutive long-body candles in the pattern, that begin within the previous candle’s body and a close that is higher than the previous candle’s highest price. There are several different types of candlestick patterns that you can use to trade the markets. In this article, we will focus on many different candlestick patterns, including bullish, bearish, and continuation candle patterns. A candlestick bar has this name because it looks like a candle with a candle wick.

Inverted Hammers represent a potential trend reversal or support levels. After a decline, the long upper shadow indicates buying pressure during the session. However, the bulls were not able to sustain this buying pressure and prices closed well off of their highs to create the long upper shadow. Because of this failure, bullish confirmation is required before action.

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