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Friday, November 27, 2009

Basics of Candlestick Chart Patterns

By Brad Morgan

One of the key indicators that aid traders interpret candlestick charts are candlestick patterns. Candlestick patterns are helpful for making uncomplicated systems that will advise you regarding the compilation of a trend in order for you to start trading.

Candlesticks have a structure that demonstrates the open, high, low and closing price of a currency, stock or commodity over a stretch of time. You can typically pick out the duration that you want to show.

5 minutes is universal for day traders but you might opt for 15 minutes in some circumstances. For longer period trading you can choose longer periods.

The body of the candle characterizes 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 marked up during the period you are reckoning. If it is black (or red on a colored chart then the opening price is the top boundary and the price tumbled.

Vertical lines pointing up from top and down from the bottom are referred to as wicks. The highest spot the price ever hit is the top of the upper wick division. The low is the bottom of the lower wick.

This kind of analysis assists the trader to know at a glance if values slashed or shot up during the analysis time frame. Bearish tendencies or rise in price are depicted by green or white candles while bullish temperament or fall in price would be pointed out by red or black candles.

The relationship of open and close values to high and low values can be noted immediately. Then there is a solid candle minus a wick.

It's called a Marubozu pattern. Prices never went more or less than the opening and closing prices in this scenario.

The high value as opening price and low value as closing price is represented by the red or black candle. Contrarily, green or white candle signifies the low was the opening price while the high was the closing price.

A longish body means a relatively consistent movement either up or down. A lengthy wick positioned on either bottom or top would signify a reversal.

For accurate trend identification a candlestick needs to be studied in conjunction with the others that preceded it. Then you can fabricate more complex candlestick patterns indicating the anticipated trends to come. - 23208

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