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Once the basics of the Forex candlestick charts have been mastered, the Forex trader will find out that there is a great deal that can be learned from a candlestick chart that has been well put together.
With the rectangle that indicates the opening and closing prices (also known as the the “candle”) and the wicks that represent the highs and lows, a trader can find out a great deal about the foreign exchange market and make wise trading decisions.
The color of the rectangle representing the candle can also provide a great deal of information.
If the currency price in question goes up, the body is white, with the opening price at the bottom and the closing price at the top. If however, the body of the candle is black, this indicates that currency price went down and the closing price is found at the bottom and the opening price at the top.
As long as the vertical axis of the candlestick chart is in proportion, a trader can tell a lot about the Forex market at a glance!
When the coloring and size of the candle and the height of the wicks are understood, a Forex trader will be better able to read the charts quite quickly.
Within the color and the length of the wick is a lot of information that is presented. With a little bit of practice, a trader will be able to tell quite a bit about the selected time frame of the Forex market with a single look at one of these highly useful charts.
When the lower wick is at least the size of the body, this signals a bullish market, where investor confidence is high. This condition is called a long lower shadow.
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Conversely, a long upper shadow occurs when the upper wick is at least as long as the body of the candle, and signals a bearish market. The longer the wicks are in their respective positions, the greater the sentiment expressed.
When a hammer configuration is observed, which is a candle with only one wick, this is also significant.
With a long lower wick and a small candle, this indicates a bullish market. An inverted hammer, with no lower wick and a tall upper wick, signals a bearish market.
It is important that the trader remember to take into account the color of the body of the candle as well, for the most accurate reading.
With its Japanese roots, the Forex candlestick chart system will have several names in Japanese. For instance, Marubozu white, when there is no wick at all the body is white, indicates a dominant bullish trade, while Marubozu black indicates dominant bearish trades.
When the trader has learned to read the Forex candlestick charts accurately, he will be able to get good, comparative information in a glance. Once a little experience at reading these charts has been gained, it becomes quite easy to effectively use them in a trading plan.
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