Rancakmedia.com – For traders, how to read candlesticks is very important. But unfortunately many beginners do not understand stock charts. Because the candlestick chart on the average stock chart. With so many patterns, compared to line charts, candlesticks are more difficult to understand.
Although 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 into the world of trading. Regardless of the trading platform used, the price changes in the up and down 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 the favorite charts of traders is Candlestick.
Candlesticks are famous for their shape like candlesticks. This medium is often used to check the movement of stocks, currencies and commodities. However, it is not uncommon for traders, when trying to read them, to be intertwined with intricate patterns. In fact, there is an easier and more accurate method for reading candlesticks.
Learn About Candlestick Charts
You must first define its features before learning how to read candlesticks. Anatomy that is similar to a candlestick is not without meaning but is a description of the important components in the inventory.
The line above the candlestick is the high and the upper shadow. On the other hand, the line below the candlestick represents the lowest price (low).
The body or candlestick is the incarnation of the opening and closing prices. When the candle is red, the closing price is lower than the initial 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 trader of rice commodities. He recorded the daily rice price fluctuations on the rice parchment. Gradually, the price blocks he made found a repeating pattern.
Honma often writes about commercial law. The technique he created became known today on the Candlestick Chart.
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 shortly thereafter. This work is well recognized around the world.
Candlesticks Can Be Read Easily And Accurately
Suppose that price dynamics arise as a result of a fight between suppliers and buyers. Each element of the wax indicates who has the upper hand, who is the loser, who is in control, and who has the greatest chance of winning the next fight.
Then, how to read Candlestick more precisely and easily. Analyze the following four elements:
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 decreases, its momentum also slows down.
The length of the candlestick wick or tail is related to price volatility. The long wick implies that the price moved quickly the entire time of the candlestick, but was rejected due to resistance.
Body Length To Axis Ratio
Be careful with body to axle ratios. If the market is trending on 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, that indicates resistance. The location of the candlestick in the middle of the lower and upper wicks indicates market uncertainty.
You can only read references to Candlestick pattern different. However, an understanding of its components must still be prioritized. If you know each element well, you can interpret candlesticks in a simpler and more accurate way.
Advantages of Candlestick Charts
What are the advantages of this candlestick chart?
- Visual candlesticks look amazing, so you can get comfortable. This makes it easier for individuals to analyze their moves.
- Candlesticks not only show changes in stock prices, they also offer indications for future price adjustments.
- Basically, it's very easy to read Candlesticks. You don't need to memorize dozens of patterns, you just have to identify the components.
- Candlesticks can clearly show market psychology. That is, traders can determine which side, whether buyers or sellers, wins. This can be seen from the size of the body and shadow.
The following is a question and answer session regarding the article above.
What Is a Candlestick Tail
The part that shows the high and low of the stock price at a certain point in time is represented by straight lines above and below the body of the candle and has 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 trade 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 entry criteria or not.
How Many Types of Candlestick Patterns Are There?
Bullish Reversal Candlestick Pattern
- Bullish Hammer
- Morning Star
- Three White Soldiers
- Bullish Engulfing Candle
- Piercing Line
Bearish Reversal Candlestick Pattern
- Bearish Harami
- Dark CloudCover
- Evening Star
- Shooting Star
- Hanging Man
- Three Black Crows
Continuation Candlestick Pattern
- Spinning Top
Candlestick chart is a popular chart used by traders to check stock, currency and commodity movements. Candlesticks are famous in the western world because of the involvement of Steve Honma, the Japanese man who created them in the 18th century.