One of the key indicators that aid traders interpret candlestick charts are candlestick patterns. Candlestick patterns are valuable for making effortless systems that will advise you regarding the compilation of a trend in order for you to commence trading.
The open, high, low, close price of the stock, commodity or currency over a period of time is illustrated in the candlestick form. The period covered is generally user selectable.
The customary time period is 5 minutes but you may favor in specific situations to consume 15 minutes. Usually, longer periods are applied for longer term trading.
The body of the candle points the difference between the open and close 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 advanced during the period you are examining. If it is black (or red on a colored chart then the opening price is the top boundary and the price tumbled.
In candles, vertical lines pointing up from the top and down from the bottom are known as wicks. The highest price ever accomplished during the period is the top of the upper wick section. On the other hand, the lowest price is the bottom of the lower wick part.
The trader can establish directly the price behavior from this analytical method. Bear markets are illustrated by green or white candles whereas bull markets are signified by red or black candles.
The relationship of open and close values to high and low values can be discerned quickly. Then there is a solid candle devoid of a wick.
The name for this is Marubozu pattern. This signifies that the opening and closing prices were never reached in either direction by the low and high market values.
If the candle is black or red, the opening rate was the high and the closing rate was the low. If it is white or green, the opening rate was the low and the closing value was the high.
A relatively constant upward or downward trend is defined by a long body. A reversal is marked by a long wick on the top or on the bottom.
In conclusion, to ensure precise trend reading, candlestick must be read within the context of the preceding candlesticks. You then can go ahead to make more detailed candlestick patterns that will imply probable future trends.