Forex traders are accustomed to seeing candlestick charts, but how many of them genuinely understand what they mean? Candlestick bars display more data than the majority of charts' lines and bars. This is due to the fact that it provides a visual representation of both open and closing prices.
The candle stick's individual parts display various asset prices at various times. When the price closes higher than it opened, a green candlestick forms, and when the price closes lower than it opened, a red candlestick will appear.
- High: The price's peak as measured by a single candlestick.
- Open: The candle's initial price.
- Low: The candle's price at its lowest point.
- Close: The point at which one candlestick has completed its formation.
"Wicks" is another name for candlestick shadows.
Benefits of using candlestick charts:
- Once you understand the psychology involved, they are simple to comprehend.
- When combined with other candles, candlesticks can form forms that may or may not have greater significance for your study.
- Large wicks on candlesticks demonstrate how particular candle sides have had more sway than others and are useful for demonstrating market strength.
Learning the patterns and formations is excellent, but what forex traders truly need to know is why such formations are made.
A few things are shown by the red candle to the right. One of the reasons the candle has this shape is that buyers were able to drive the price much higher than the open price, but sellers were also able to drive the price significantly lower than the buyers before the candle could fully form. This demonstrates how sellers have added additional capital to the market by selling the asset now. This kind of analysis, when combined with other elements like the logicStrategy, may prove to be a productive tactic.
If all you know about candlesticks is their definitions, stop what you're doing, consider why they have that shape, and then resume your study.
Candlesticks can provide insight into the psychology of the market.