How to Read Candlestick

 

Candlesticks are known for their shape that resembles a candlestick. This media is commonly used to analyze the movement of stocks, forex, to commodities. However, it is not uncommon for traders to get entangled with complex patterns when trying to read them. In fact, there are two ways to read candlesticks that are simpler and more accurate.

Reading candlesticks is not just memorizing and knowing the formations. Many books reference hundreds of candlestick patterns, with each pattern having the information and description to know what will happen next in the forex market. In fact, memorizing hundreds of candlestick patterns does not make a significant difference to a trader's trading performance. Actually, traders don't need to memorize all patterns for candlestick analysis, traders only need to know the big picture how to read candlesticks, because each candle is basically able to inform price structure, trend strength, buyer versus seller dynamics, and projected direction the price will move later.

How to Read Candlesticks

If the candlestick is green, it means that the price has increased and closed higher or has a large enough buying interest. However, if the candlestick is red, it means that the price has decreased and closed lower or the selling pressure is large.

The most important thing to understand is that candlesticks convey messages regarding the market structure, the strength of a trend, the battle of buyers and sellers and the possibility of the next price movement. Price movement is a battle between buyer/buyer/bull traders vs seller/sell/bears traders.


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