As a new trader, you need to learn buy/sell strategies and risk management that can grow and protect your investment. An expert coach can show you how to read candlestick patterns, a form of charting analysis used to identify potential trading opportunities. When used correctly, these patterns can help you identify possible trend reversals, breakouts, and continuations in the market.
How to Read Candlesticks
Candlesticks show 4 pieces of pricing information: the opening, the closing, the low, and the high price.
The body of the candlestick indicates the difference between the opening and closing prices for the day. Usually, candlesticks are colored so that it’s easier to identify whether it is bullish (rising prices) or bearish (falling prices). When the candlestick is bearish, the closing price was lower than the opening price. A bullish (usually white or green) indicates the closing price was higher than the opening.
Many traders consider the color and length to be the most important segment of the candlestick. There is also a lot to learn from the length and position of the shadows. For example, a tall upper shadow shows that the market rejected higher prices, while a long lower shadow shows that the market rejected lower prices.
As a result, when you look at the color and length of the candlestick, as well as the shadows, you’ll get an idea of whether the market is strengthening or weakening. This makes it a great tool for Forex day-trading strategies, as it offers quick insight on short-term price movements in the market.
Candlestick patterns can be grouped into two categories: reversal patterns and continuation patterns. The reversal patterns signal a coming price-reversal, while the continuation patterns signal a coming continuation of the previous price-move.
Therefore, reading candlestick patterns is great for long-term investments because the patterns can be used to anticipate future price movements, analyze the psychology behind the market participants, and gauge the market sentiment.
A Forex coach can help you identify some of the common candlestick patterns. With practice, reading candlesticks will become an easy tool to help you better analyze and understand the market.
The real advantage of using candlesticks in Forex trading is that they allow you to see market turning points, so they can help you decrease market risk exposure. With practice, candlestick charts become easy to understand as they enhance charting analysis; and they can even be used in different markets.