Many traders use a candlestick chart as it the most efficient chart to view the asset’s price changes. Its visual appeal makes it become more popular than the bar and line charts. Thus many traders feel ways to use candlestick chart is easier than the other two charts.
Every candle within the chart represents the completion of a certain number of trades. With this chart, traders can select the time frame and number of trades provided.
The popular time frame for this chart is one minute and five minutes frame. This chart provides high, low, and close prices.
Before a new candle formed, there is a set number of trades to be carried out, known as a tick. 233. 466, and 512 are the most common trades per tick carried out by traders. The number of the contract within a trade does not affect the tick.
The real bodies
Every candle consists of a real body and two wicks (known as shadows or tails). The body is the most essential part since it represents the difference between the close and open price.
Those two prices are the first and the last transaction price for each period. Small or no real body means the open and close price are similar or same.
The body usually in the solid color of white/black and green/red. The white or green candle shows that the close price is higher than the open price. Contrarily, the black or red candle shows that the close price is lower than the open price.
The wicks or shadows
Wicks and shadows are the thin lines above or below the real body. It represents the movements that happened between the open and close prices.
The high price during a period is shown by the highest part of the wick at the top of the real body. No wick means the top of the body is the highest price.
In contrast, the lowest wick at the bottom of the real body shows the low price movement within a period. You can know the price range for a period from the difference between the high and low prices.
Also read: Top 3 Forex Charts for Trading
The pattern
During the technical analysis, Traders usually see patterns within a candlestick chart due to its visual nature. Those patterns indicate a trend’s continuation or reversal that highlights trading opportunities they can take, later.
The most common used candlestick patterns with trend analysis are three-line strikes and two black (or red) gapping.
