Basic Knowledge of How to Read Candlesticks
Candlesticks are known for their shape that resembles a candlestick. Candlesticks are one of the favorite charts for traders. Candlesticks are generally used to analyze the movement of stocks, forex, to commodities. But it is not uncommon for traders to get entangled with complicated patterns when trying to read them. Even though there is an easy way to read candlesticks, namely:
1. Body Size
Through the size of the cadlestick body, traders can get information about the strength of each party. If the body is elongated, it means that the momentum is strengthening. However, if the body shrinks, then the momentum is also getting slower.
2. Axis Length
The length of the wick or root of a candlestick relates to price volatility. The long wick indicates the price is moving fast for the duration of the candlestick, but getting rejected due to resistance.
3. Ratio Between Body Length and Axis
When the market is trending with high momentum, traders will often find candlesticks that are long but with smaller wicks. When market conditions are uncertain, volatility will increase. Here, the body of the candlestick will be smaller, but the wick is actually longer.
4. Candlestick Body Position
When a trader finds a candle with a long wick with the body positioned at one end, it indicates resistance. Meanwhile, the position of the candlestick which is in the middle of the lower wick and the upper wick indicates uncertainty in the market.
Watch the video below for more clarity and details!
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