Understand Candlestick Charting
on Aug.10, 2009, under Gambling
Unless you understand Candlestick charting, you cant trade and invest effectively in securities or currencies. It is essential that you understand Candlestick charting. Many options exist for the charting of currencies and securities now with the advancement of technology. There are several types of charts easily available on the charting software. The four main charting methods are: 1) Candlestick charts, 2) Line Charts, 3) Point and Figure Charts and 4) Bar Charts.
The three charting methods pale in comparison with the candlestick charting for a number of reasons. One of the best features of candlestick charting is its visual appeal and readability. With a simple glance on the candlestick charts you can understand whats going on with the price of a currency pair.
You can get a sense of how the price is trending with the candlestick charts. You can easily spot the opening and closing price of a currency pair on a candlestick charts. You can also tell whether the buyers or sellers have dominated a given day. These price levels can be an important area of support and resistance for a given day.
When analyzing price action of currency markets, why should traders choose candlestick charts over other types of charts? Candlestick charts feature specific patterns that you can identify and use to decide when its best time to buy, sell or wait on a trade. Candlestick charting patterns indicate when prevailing trends reverse or when they continue.
Traders need easy to read charts that allow them to make quick decisions and efficiently analyze patterns. Candlestick charting offers those benefits and many more. The need for a consistent and dynamic charting method is more important than ever. Trading is becoming more and more complex. The following four pieces of information are combined to make a candlestick:
Opening Price: The first piece of information used to create a candlestick is the price at which a particular currency pair opens on a given period.
High Price: The top of the candlesticks wick corresponds to the highest price reached during that given period. If a currency pair opens at a certain price and then trades consistently lower than that price throughout that period, there wont be any wick at all above the candle.
Low Price: The lowest price that a currency pair reaches during a period corresponds to the bottom of the candlesticks wick.
Closing Price: The closing price of the currency pair at the end of a given period is the last piece of information used to create a candlestick. Depending on the price action, the closing price can be the top edge of the candles body if the price action is bullish. It can be the bottom edge of the candles body if the price action is bearish.
Candlesticks that represent bearish price action appear black. Candlesticks that represent bullish price action appear white on the chart. By looking at the candlestick charts than you can by looking at another type of charting tool, you can gain far more insight into a periods trading.
You can tell right away that the up day has a white candle and the down day has a black candle. That simple difference alone clearly reveals the nature of price action that took place during that period.
Candlestick charts quickly clue you on the type of buying and selling thats been going on during a given period and where it may occur again.