How to Read Candlesticks in Trading for Beginners

Lovata Andrean

How to Read Candlesticks in Trading for Beginners
How to Read Candlesticks in Trading for Beginners

Rancakmedia.com – For traders, how to read candlesticks is very important. But unfortunately many beginners don't understand stock charts. Because candlestick charts in stock charts are averages. With so many patterns, compared to line charts, candlesticks are more difficult to understand.

Even though it is very complex, this one pattern still guides many traders. You are no stranger to charts or graphs that provide price information for those who are involved in the world of trading. Regardless of the trading platform used, price changes in the upward and downward charts will be displayed.

Historical data is a medium for technical analysis. Various types of charts are often used by traders. Each has its own features and benefits. One of traders' favorite charts is Candlestick.

Candlesticks are famous for their candlestick-like shape. This media is often used to check stock, currency and commodity movements. However, it is not unusual for traders, when trying to read them, to be intertwined with complex patterns. In reality, there are easier and more accurate methods for reading candlesticks.

Learn About Candlestick Charts

You must first determine the features before learning how to read candlesticks. Anatomy similar to a candlestick is not meaningless but is a depiction of important components in inventory.

The lines above the candlestick are the highest price and upper shadow. On the other hand, the line below the candlestick represents the lowest price.

Learn About Candlestick Charts

The body or candlestick is the embodiment of the opening and closing prices. When the candle is red, the closing price is lower than the starting price. But if the candle is green, the closing price is above the initial price.

History of Candlestick Charts

Munehisa Honma is the person behind Candlestick. In the 18th century, this Japanese man was a rice commodity trader. He recorded daily fluctuations in rice prices on rice parchment. Gradually, the price blocks he created discovered repeating patterns.

Honma often writes about commercial law. The technique he created became known today in Candlestick Charts.

Candlestick is famous in the western world because of Steve Nison's involvement. When he met a Japanese broker in 1987, he discovered this technique. He published a book called Japanese Candlestick Chart Techniques not long after. This work is well recognized throughout the world.

Candlesticks Can Be Read Easily And Accurately

Suppose price dynamics arise as a result of a struggle between suppliers and buyers. Each candle element shows who is superior, who is losing, who is in control, and who has the greatest chance of winning the next fight.

Then, how to read Candlesticks more precisely and easily. Analyze the following four elements:

Body size

You can get information about the strength of both sides through the size of the candlestick body. When the body is extended, momentum increases. However, if the body declines, its momentum also slows down.

Axis Length

The length of the candlestick's wick or tail is related to price volatility. A long wick implies that price moved quickly throughout the time of the candlestick, but was rejected due to resistance.

Body Length to Axis Ratio

Be careful with the body to axis ratio. If the market is trending at high momentum, you will often find long but smaller candlesticks.

Volatility will increase if market conditions are unclear. Here, the body of the candlestick is smaller, but the wick is actually longer.

Candlestick Body Position

If you find a candle with a long wick at one end, it indicates resistance. The location of the candlestick in the middle of the lower wick and the upper wick indicates market uncertainty.

You can only read references to Candlestick patterns different. However, understanding the components must still be prioritized. If you know each element well, you can interpret the candlesticks in a simpler and more accurate way.

Advantages of Candlestick Charts

What are the advantages of this candlestick chart?

  • Candlestick visuals look amazing, so you can look comfortable. This makes it easier for individuals to analyze their movements.
  • Candlesticks not only show changes in stock prices, they also offer indications for future price adjustments.
  • Basically, it is very easy to read Candlesticks. You don't need to memorize dozens of patterns, you just need to identify the components.
  • Candlesticks can show market psychology clearly. This means that traders can determine which side, whether buyers or sellers, wins. This can be seen from the size of the body and its shadow.

FAQ

The following is a question and answer session regarding the article above.

What is Meant by Candlestick Tails

The part that shows the high and low share prices at a certain point in time is represented by straight lines that are above and below the body of the candle and have the same color as the shape of the candle (candlestick).

What is a Confirmation Candle

Confirmation candles are candle shapes or patterns that when formed validate a trading signal. When there is a confirmation candle, the trading plan is eligible to enter the market. Therefore, the confirmation candle is very important because it determines the criteria for entry or not.

How Many Types of Candlestick Patterns?

Bullish Reversal Candlestick Pattern

  1. Bullish Hammer
  2. Morning Star
  3. Three White Soldiers
  4. Bullish Engulfing Candle
  5. Piercing Lines

Bearish Reversal Candlestick Pattern

  1. Bearish Harami
  2. Dark cloud cover
  3. Evening Star
  4. Shooting Star
  5. Hanging Man
  6. Three Black Crows

Candlestick Continuation Pattern

  1. Doji
  2. Spinning Top

Conclusion

Candlestick charts is a popular chart used by traders to check the movement of stocks, currencies and commodities. Candlesticks are famous in the western world because of the involvement of Steve Honma, the Japanese man who created them in the 18th century.

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Lovata Andrean

Hi, I'm Lovata, I'm not Ai but I am a content writer for SEO, Technology, Finance, Travel, Cooking Recipes and others. I hope this can be useful for all my friends. Thanks