Written by 10K to 1MM Trading Formula
Knowing how to read candlestick charts is essential for both stock trading and foreign FOREX trading. Candlesticks are a record of movements in prices that will help a trader to identify trends and spot upcoming breakouts and reversals or retracements. Many traders may be able to develop profitable trading systems about totally on the premise of candlestick charts, and many more systems rely on them as a first or primary signal. The chart is made up of a collection of blocks or candles, each one showing the open, close, low and high prices over a period. The open and close prices may be the prices for a day’s trading but mostly you have control over the period and you can set your chart to show a candle for each hour, for 5 mins or whatever. If you’re designing systems around this type of chart you will doubtless need to test your signals over more than one period of time before you open a trade. If the price dropped in the period, the body of the candle will be shaded, either black or a color. In this situation naturally the upper edge of the body is the open price and the lower edge is the close. In all cases, the high in the period is the top of the vertical line or wick stretching upward from the apex of the block. The low during the period is the bottom of the vertical line or wick running down from the base of the block. You may have green or blue for a bullish period when the price was rising and red for a bearish period when the price was falling.