Candlesticks, candlestick patterns and what they mean

 

There are a variety of methods that Forex traders use such as swing trading, day trading or reversal trading. There are also tons of apps that can help traders analyze the market and that make trading easier and much more convenient.

Among these, you can find BUX as well as numerous mobile trading apps but before you get into all these, some basic knowledge is required.

Although they can help you score big when it comes to trading, the sheer number of factors as well as risks that traders face on a daily basis can (if you are unable to handle the strain) really get you down and may even have adverse effects on your physical (as well as mental) health.

If you are a beginner, it is highly recommended that you stick to a demo account first in order to get a firm grasp on some of the technicalities and to find out which strategies work best for you before diving into the real thing with a live account.

Moreover, being a good trader requires that you commit to lifelong learning and practice as well as lots and lots of market movement analysis.

In fact, some successful traders still keep in touch with their demo accounts so that they can keep testing out new methods and hone their skills.

Being a good trader also requires having a strong mindset. One very basic skill that you will need is the ability to not get too emotionally involved with each trade.

Arguably, the most popular (and basic) charting technique used by traders is candlestick chart analysis. Depending on which timeframe you choose for your chart, a candlestick can represent a minute, five minutes, fifteen minutes, an hour, four hours, a day and so on.

For the purpose of this introduction, we will be referring to the daily timeframe.

For the most part, a candlestick consists of a wide section called the “real body”. If the candlestick’s real body is filled in, this means that the day’s close was lower than the open and if the real body is empty, it means the opposite.

Attached to either end of the real body (above and below) are the “shadows” of the candlestick, which represent the high and low prices of the day.

If the upper shadow is short and the real body is filled in, this means that the open of the day is/was closer to the high of the same day. A candlestick’s real body and shadow can vary in length, whether filled in or empty.

Generally, more than one candlestick has to be analyzed in order to predict market movements. Candlesticks can form many patterns, some more reliable than others.

Here are some other examples of candlestick patterns that you may find in the market:

 

Three black crows

Sometimes starting at the high of the uptrend, three filled in candlesticks that post lower lows may predict that the trend may fall lower. This is a bearish three black crows reversal pattern and has a high accuracy rate.

 

Evening star

A tall, empty candlestick in an uptrend with a higher gap to a narrow range candlestick and a gap down on the third candlestick completes the bearish evening star reversal pattern. It predicts that the trend will drop to lower lows.

 

Two black gapping

A gap down to two filled in candlesticks that post lower lows after a top candlestick in an uptrend is a bearish two black gapping pattern. This will predict that the downtrend will continue pushing to lower lows.

Some traders may need more than just a candlestick chart to predict market movements. Remember that there is a lot to learn about trading and there are many strategies and tools that you should look into if you want to be a good trader.

Before investing too heavily into this endeavor, be sure to knowledge up, constantly practice and safeguard yourself with the right kind of training.

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