Trading Cuentas

The wonderful thing about candlesticks is that you can see the direction of price movements at a peek. Not only do you see if the candle as a whole is above or below the prior one, but you may also tell by the colours whether it marked a reversal or a continuation of the trend.

Certain patterns are particularly vital in learning the best way to read candlestick charts.

In some cases of course the open or close will be the high or the low. In that case you do not have a wick in one or both directions. If there is no wick in either direction, this is referred to as a Marubozu pattern.

In another case, the opening and closing prices could have been the same. Then there isn’t any candle body but only wicks stretching up and down from the horizontal line that marks the open and close. This is known as a Doji pattern.

If the body of the candle is long with short or non existent wicks, close to Marubozu, this indicates a reasonably steady movement, potentially part of a trend. The colour of the candle will tell you if it is an upward or downward movement.

On the other hand if the wicks are long and the body is short or non existent, more like the Doji pattern, this could indicate a unsettled market with big fluctuations. Trend based trading will are suspicious of Doji patterns, that might be a sign the market is becoming untrustworthy.

Of course one candlestick on it’s own is not enough to form the basis of a trading call. You’ll always look at a collection of candles. For example, you can draw trend lines along the highest highs and lowest lows on candlestick charts. These will help you to spot whether a trend is forming, or if the lines are converging, whether a breakout might be predicted. When you understand how to read candlestick charts you can base systems around these indications.