Candlestick Charts
You cant trade and invest effectively, unless you understand Candlestick charting. With the advancement of technology, many options exist for the charting of currencies. There are several types of charts. The four main charting methods are: 1) Line Charts, 2) Bar Charts, 2) Point and Figure Charts and 4) Candlestick charts.
For a number of reasons, the three charting methods pale in comparison with the candlestick charting. Candlestick charting has unique and inherent advantages over the other charts. You can understand whats going on with the price of a currency pair with a simple glance on the candlestick charts. One of the best features of candlestick charting is its visual appeal and readability.
You can also tell whether the buyers or sellers have dominated a given day. You can also 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. These price levels can be an important area of support and resistance for a given day.
Candlestick charts also feature specific patterns that you can identify and use to decide when its best time to buy, sell or wait on a trade. Why should traders choose candlestick charts over other types of charts when analyzing price action of currency markets?
Trading is becoming more and more complex. The need for a consistent and dynamic charting method is more important than ever. 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 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. Depending on whether that price is bullish or bearish, opening price can be the bottoms edge or the top edge of a candles body.
High Price: The highest price reached during that given period corresponds to the top of the candlesticks wick.
Low Price: The bottom of the candlesticks wick corresponds to the lowest price that a currency pair reaches during a period. If the price action has been extremely bullish and the prices trade higher than the open, there wont be any wick below the candle.
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.
You can gain far more insight into a periods trading by looking at the candlestick than you can by looking at another type of charting tool. Candlesticks that represent bullish price action appear white on the chart. Candlesticks that represent bearish price action appear black.
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. Candlestick charting also tell you where it may occur again.