How to Read Trading Candles:
1. Components of one candle:
Body:
It represents the difference between the opening price and the closing price during a specified period of time.
If the price rose during the period, the body is green (or white).
If the price falls, the body is red (or black).
Wicks or Shadows:
Indicates the highest and lowest price reached during the period.
Upper wick: High.
Bottom wick: Low price.
2. Types of candles:
Bullish candle: The closing price is higher than the opening price (usually green).
Bearish candle: The closing price is lower than the opening price (often red).
Common Candlestick Patterns:
1. Individual patterns:
Hammer candle:
It appears after a downtrend.
Small body with long lower wick (indicating a bullish reversal).
Hanging Man Candle:
Appears after an uptrend.
Small body with long lower wick (signal of bearish reversal).
Doji candle:
The opening and closing price are almost equal.
Indicates hesitation in the market.
2. Binary and ternary patterns:
Bullish Engulfing:
A bullish candle completely covers a previous bearish candle.
Indicates a bullish reversal.
Bearish Engulfing:
A bearish candle that completely covers a previous bullish candle.
Indicates a bearish reversal.
Stars pattern:
Like "morning star" for rising or "evening star" for falling.
How to use Japanese candlesticks in trading:
1. Determine entry and exit points:
Use candlestick patterns to identify potential areas of trend reversal or trend continuation.
2. Momentum analysis:
Body length and wicks reflect market strength.
Long bodies = strong momentum.
Long wicks = hesitation between buyers and sellers.
3. Integrate it with other tools:
Combine candlesticks with support and resistance levels, trend lines, or indicators like RSI and MACD to improve accuracy.
Tips for Success Using Japanese Candlesticks:
Learn the most common and effective patterns.
Don't rely solely on candlesticks; use them in conjunction with other analysis tools.
Test your strategies on a demo account.
Risk management is essential in any trading strategy.
Do you need an explanation of a particular pattern or strategy using candlesticks?