rancakmedia.com – For traders, how to read candlesticks is very important. But unfortunately many beginners do not understand stock charts. Because the candlestick chart in the average stock chart. With so many patterns, compared to line charts, candlesticks are more difficult to understand.
Although very complex, this one pattern still guides many traders. No stranger to charts or graphs that provide price information for those who enter the world of trading. Regardless of the trading platform used, the price changes in the up and down charts will be displayed.
Historical data is a medium for technical analysis. Different types of charts are often used by traders. Each has its own features and benefits. One of the favorite charts of traders is the Candlestick.
Candlesticks are famous for their shape like a candlestick. This medium is often used to check the movement of stocks, currencies and commodities. However, it is not uncommon for traders, when trying to read them, to be intertwined with intricate patterns. In fact, there is an easier and more accurate method of reading candlesticks.
Learn About Candlestick Charts
You must first determine its features before learning how to read candlesticks. Anatomy that is similar to a candlestick is not without meaning but a description of the important components in inventory.
The line above the candlestick is the high and the upper shadow. On the other hand, the line below the candlestick represents the lowest price (low).
Body or candlestick is the incarnation of the opening and closing prices. When the candle is red, the closing price is lower than the initial price. But if the candle is green, the closing price is above the initial price.
History of Candlestick Charts
Munehisa Honma is the person behind the existence of Candlestick. In the 18th century, this Japanese man was a rice commodity trader. He recorded daily rice price fluctuations on the rice parchment. Gradually, the price blocks he created found a repeating pattern.
Honma often writes about the law of commerce. The technique he invented becomes known today on Candlestick Charts.
Candlestick is famous in the western world due to the involvement of Steve Nison. When he met a Japanese broker in 1987, he discovered this technique. He published a book called Japanese Candlestick Chart Techniques shortly thereafter. This work is well acclaimed all over the world.
Candlesticks Can Be Read Easily And Accurately
Suppose that price dynamics arise as a result of a fight between suppliers and buyers. Each element of the candle indicates who is superior, who is losing, who is in control, and who has the greatest chance of winning the next fight.
Then, how to read Candlesticks more precisely and easily. Analyze the following four elements:
Body size
You can get information about the strength of both sides through the size of the candlestick body. When the body is extended, the momentum increases. However, if the body decreases, its momentum also slows down.
Axis Length
The length of the candlestick wick or tail is related to the price volatility. The long wick implies that the price was moving fast all the time of the candlestick, but was rejected due to resistance.
Ratio of Body Length to Axis
Be careful with the body to axle ratio. If the market is trending at high momentum, you will often find long but smaller candlesticks.
Volatility will increase if the state of the market is not clear. Here, the candlestick body is smaller, but the wick is actually longer.
Candlestick Body Position
If you find a candle with a long wick at one end, it indicates resistance. The location of the candlesticks in the middle of the lower and upper axes indicates market uncertainty.
You can only read references to different Candlestick patterns. However, an understanding of its components must remain a priority. If you know each element well, you can interpret the candlesticks in a simpler and more accurate way.
Advantages of Candlestick Charts
What are the advantages of this candlestick chart?
- Visual candlesticks look amazing, so you can appear comfortable. This makes it easier for individuals to analyze their movements.
- Candlesticks not only show changes in the price of a stock, they also offer an indication for future price adjustments.
- Basically, it is very easy to read Candlesticks. You don’t need to memorize dozens of patterns, you just need to identify the components.
- Candlesticks can show the psychology of the market clearly. That is, the trader can determine which side, whether the buyer or the seller, wins. This can be seen from the size of the body and its shadow.
Conclusion
Candlestick charts are popular charts used by traders to check the movement of stocks, currencies and commodities. Candlesticks are famous in the western world because of the involvement of Steve Honma, the Japanese man who created them in the 18th century.
Honma’s technique for reading candlesticks is known as the Law of Commerce. He writes about the laws of commerce in his book The Law of Business. Each element of the candle indicates who is superior, who is losing, and who has the greatest chance of winning the next battle.
If you know each element well, you can interpret the candlesticks in a simpler and more accurate way.
The length of the wick or the tail of the candlestick is related to the volatility of the price. You can get information about the strength of both sides through the Candlestick body size.
