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Basics of Candlestick Patterns

One of the most attractive forex features is that you can profit from Forex at the comforts of your home or at an airport waiting for your flight or at the beach in Thailand. It is a risky business too.

You have to discover yourself whether this business for you. Whether you sociological, physiological and intellectual strengths are combined to trade and win. You can not avoid the risks entirely. Therefore, you must be a risk taker and a firm decision-maker as well. There are many visual tools and charts to assist you in making right decisions.

If you are a beginner of forex, you must learn how to read and analyze the candlestick charts yourself and use them in your trading strategy. Some sources call is “the candlestick strategy”, but it is not entirely correct. The candlestick chart analysis, is just a popular visualization of the currency dynamics which helps to develop your trading strategy or follow some well known strategy.

Candlestick charts are among the popular and easiest tools for forex analysis that you can use in foreign exchange trading. A basic knowledge on how to interpret them makes a lot of difference in making correct trading decisions. Candlestick charts, like bar charts and graphs are visual representation of the market situation, but more importantly, it visually represents the price. The rest is just secondary. If you look at a candlestick pattern, you will have a very good idea of the market movements.

Check out your candlestick chart. It has a price and a time dimension. For instance, if you are looking at an hourly candle, that means every candle represents the movement of the price in one hour. The highest price for the day is represented by the upper wick of the candlestick and the lowest price for the day is the bottom of the candle or the lower wick. The topmost and lowermost portion of the body of the candle represents the opening or closing price.

The color represents the market situation. If the candle is colored white or red, it means the price went down, while black, blue or green colors mean the price went up. You probably remember that an upward movement of the price is called the bullish market whereas the downward movement is called d the bearish.

These representations in the candlestick chart analysis creates certain patterns that will help you predict future movements of the currency market. Although they do not produce correct predictions there is no doubt that this is very helpful and powerful tool that can help you make wise decisions in your trading.

The candlestick chart analysis also provide you with important patterns that will help you decide whether to trade or not. Of course, it is important to learn these tools in trading. Knowledge on the market situation as well as price fluctuations are among the main factors that you have to consider to be successful in trading. Of course, fundamental analysis on the socioeconomic as well as political situations of the country is important as well.

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