1 minute read
How to understand Candlesticks
by expertmagic
HOW TO UNDERSTAND CANDLESTICKS
The Japanese candlestick chart is our favorite chart for trading. Although we have already spoken, let's examine in more detail.
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This is the most comprehensive “indicator” and the heart of the Price Action.
A Japanese candlestick shows exactly the same information as a bar chart, but in a simpler way to read.
How to understand a Japanese candlestick and use for trading?
As we can see each candle has a wick, in both up and down (upper shadowlower shadow).
Our job as traders is to identify the significance of the Japanese candlestick.
With That said, we are interested in the body of a Japanese candle but also the wick.
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If the body of our candle is green like the candle on the left, it means that the price closed at a higher price to the opening price. In other words, the price has increased, it is called a bullish candle.
Otherwise, if the body of our candle is red like the candle on the right, it means that the price closed at a price below the opening price. In other words, the price has dropped, it’s a bearish candle.
There are many figures of Japanese candles, some with giant wicks other with short wicks, others with very little body etc.
Traders need to learn the different figures. We are going to explain them late.
THE PRICE ACTION IN THE TECHNICAL ANALYSIS
The Price Action is the discipline to trade basing decisions on clean and simple charts. Price action charts does not have indicators, or try to reduce as much as possible.
We believe that the purely price actually reflects what investors are doing. This indication is more than enough to find a simple and useful strategy.
What differentiates price action traders with others is that we use the price as the main reference while other traders tend to use the indicators first as a main reference, then in a second place consider the price, which is a huge mistake.
The great advantage of Price Action is that it can be applied to any other financial market for trading such as (stocks, indexes, futures etc ...).
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