Benefits of Reading Candlesticks on Large Time Frames
The term candlestick is certainly no stranger to traders who enter the world of online trading. Candlestick is a technique or type of chart that is often used to read market conditions. This technique can show signs of reversal or reversal of direction. The candlestick technique is able to provide an overview of decision making related to buy or sell. The shape of the candle bar is formed from price movements. In general, there are two patterns of price movement, namely bullish (up) and bearish (down). Bullish occurs when the price rises continuously. Meanwhile, bearish occurs when prices experience a continuous decline. A candlestick chart stores a number of information, including:
- Opening price (open)
- Closing price (close)
- The dynamics of price movements (high or low)
Candlestick analysis is the process of putting all probabilities in line. Signals and patterns can make market index analysis very easy. If the trader knows which direction the market should move, then the trader can position the trader's portfolio in that direction. Candlestick signals and patterns help identify which stocks have better upside potential. If it has been determined that the market index is moving positively, the next step to increase the probability is to see which sector has the strongest reversal signal.
Reading candlesticks has the following benefits:
Easier to Analyze
The color on the candlestick chart body will make it easier for traders to quickly see who controls the market, whether bull or bear. In addition, the length of the candlestick body also shows how dominant the control is owned by the bull or bear. This is different from a bar chart where traders must first pay attention to the details where the opening and closing prices are on the bar. Candlestick patterns are also easier to identify when compared to classical chart patterns such as head and shoulders, double top or double bottom. Classical chart patterns require more than 10 bars for the formation to form, and even then sometimes the interpretation between one trader and another can be different. Unlike candlestick patterns, which mostly require one to three bars to form and have clear rules that make it easier for us to analyze them.
Gives a Rapid Change of Direction
Candlesticks help traders see market sentiment so they are very good at signaling a change in direction. In fact, the signals that appear are often faster than the indicators, so candlesticks are used as a reference for entry and exit.
Can Be Used With Other Technical Analysis Tools
Despite originating in Japan, candlesticks can be used in conjunction with other technical analysis tools. This is because candlesticks use the same opening, high, low, and closing prices as bar charts. The use of candlesticks together with other technical analysis tools actually strengthens the analysis of candlesticks.
Watch the video below to get clearer and more detailed information!
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