Why candlesticks are important to your trading analysis? What is a candlestick?

Candlesticks are important to you trading analysis because, it is considered as a visual representation of what is going on in the market. By looking at a candlestick, we can get valuable information about the open, high, low and the close of price, which will give us an idea about the price movement.

Candlesticks are flexible, they can be used alone or in combination with Technical Analysis tools such as the moving averages, and momentum oscillators, they can be used also with methods such the Dow Theory or the Eliot wave theory.

I personally use candlesticks with Support and Resistance, Trend lines, and other technical tools. The human behavior in relation to money is always dominated by fear, greed, and hope, candlestick analysis will help us understand these changing psychological factors by showing us how buyers and sellers interact with each other’s.

Candlesticks provide more valuable information than bar charts, using them is a win-win situation, because you can get all the trading signals that bar chart generate with the added clarity and additional signals generated by candlesticks.

Candlesticks are used by most professional traders, banks, and hedge funds, these guys trade millions of dollars every day, they can move the market whenever they want. 

They can take your money easily if you don’t understand the game. Even if you can trade one hundred thousand dollars trading account, you can’t move the market you can’t control what is going in the market.

Using candlestick patterns will help you understand what the big boys are doing, and will show you when to enter, when to exit, and when to stay away from the market.

What is a candlestick? 

Japanese candlesticks are formed using the Open, High, Low and Close of the chosen time frame.

You can find different colors used to differentiate between Bullish and Bearish candlesticks.

Filled part of the candlestick is called the Real Body

  • The Thin lines poking above and below the body are called shadows. 
  • The Top of the Upper Shadow is the High. 
  • The Bottom of the Lower Shadow is the Low.

Bullish Candlestick

  • If the close is above the open, we can say that the candlestick is bullish. which means that the market is rising in this period of time. Bullish candlesticks are always displayed as Green candlestick
  • The most trading platform use green color to refer to bullish candlesticks. But the color doesn’t matter, you can use whatever color you want.

Bearish Candlestick

  • The most important is the open price and the close price. If the close is below the open, we can say that the candlestick is bearish which indicates that the market is falling in this session.
  • Bearish candles are always displayed as Red candlesticks. But this is not a rule.

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