Fundamental Chart Barometers: Candlestick Patterns
December 1st, 2009
Candlestick patterns are customary indicators that benefit a trader to investigate candlestick charts. This can be advantageous when establishing simple systems that will update you when a trend is evolving so that you can initiate a trade.
The shape of the candlesticks signify the high, low, open and closing price of stocks, currencies or commodities during a particular period. This period can be chosen by the trader.
The ecommended time period is 5 minutes but you may favor in particular situations to consume 15 minutes. Typically, longer periods are applied for longer term trading.
The body of the candle records the difference between the open and close prices. If it is white (or green/blue on a colored chart) the open is the lower boundary of the elliptical body and the price increased 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 went down.
The wick is the label given to the vertical lines that generally stick up from the top and down from the bottom of the candle body. The top of the upper part of wick is the highest stage that the price ever achieved during the period. The bottom of the lower wick is the low.
The trader can conclude directly the price behavior from this analytical method. Bear markets are signified by green or white candles albeit bull markets are signified by red or black candles.
The relationship of open and close values to high and low values can be examined immediately. 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 rates.
The high value as opening price and low value as closing price is designated by the red or black candle. Adversely, green or white candle indicates the low was the opening price while the high was the closing price.
A long body means a relatively consistent movement either up or down. A lengthy wick detected on either bottom or top would denote a reversal.
A candlestick has to be elucidated along with the previous ones in order to ensure appropriate trending. From there relatively intricate trends can be actualized to delineate the trends in the future.