With more brokers allowing new traders to open a no deposit account and increasing their leverage margins, the tendency is shifting towards short-term trading recently. Latest studies show that most traders initiate a huge number of trades and sell the same within a span of few minutes only. This demands the use of charts and plots as these are capable of providing substantial information in a small interval of time. Forex candlestick analysis is one such form of technical analysis that is used by almost all investors in this market.
Forex candlestick analysis – the technicality involved.
This form of chart variant has been in use for almost 300 years. Candlestick charts were first used by the Japanese to observe price variation of their rice. This trend led to its use in the forex market to observe and forecast the market movement of currency values.
The chart comes with a wide square box indicating the open and close position for the day or at that particular span of time. A red/black box is an indication of a falling market while a white/green real body indicates a rising one. There are often thin lines above and below the real body of this graph. It represents high and low prices for the day. Together, candlesticks analysis in forex represents the relationship between high, low, open, close of market quote for that particular interval of time.
How forex candlestick analysis may help you to make profit?
Expert traders claim that proper candlestick analysis reveals a host of information at first glance and can increase a trader’s chances of making a profit. Here are few listed ways in which you can read this chart and put in your timely order.
- The trend tends to repeat itself. In other words, if the market has moved in a particular pattern in the past 24 hours, it can be assumed that it will follow a definite trend and move in a similar fashion. Hence, read candlesticks for the past few hours and place an appropriate order.
- A long white real body will suggest that purchase pressure is high as market is bullish. A red real body suggests sell pressure and the market is bearish. You can reverse your trade accordingly and make your buy in a bearish market. Why? As you have performed candlesticks analysis forex and it showed that market is expected to be bullish after this phase.
- At times, it so happens, that open price for next candlestick begins at a lower price than the closing of previous. You may take this opportunity to place a buy order as a bearish market makes purchasing easy. But again, make this purchase only when the next candlestick is expected to be a white/green one.
In short, candlesticks analysis forex helps you in accurately forecasting the market and put in timely orders. Find out more about forex forecasting and how it is essential in forex trading. Candlestick charting trend is the most popular form and much easier to read than a simple bar- or line-graphs. Do your research about all the patterns involved and start investing soon.