There are many people out in the world who would like to become successful traders. Their definition of “successful” will certainly vary, but the common them tends to always be…to make more money. While this is a great thought, it is not very specific. Based on conversations with some of the most successful traders in the world, there are a few common elements that exist within the arsenal of their trading toolboxes. To be a good trader, you need to have a few basics understood. The main item here is knowing when to enter and when to exit a trade. This can be achieved through understanding candlestick patterns.
Understanding Candlestick Patterns
Many people believe that learning candlestick patterns can be difficult or tedious. I must object to that common misconception by saying that understanding these candles can be quite easy if the proper steps are taken to learn them. First, as seen in the diagram, all candles have the same four points. These include: open, high, low, and close. It does not matter what time frame that you are looking at as candle patterns will work on any time frame. So whether you are looking at one minute, 60 minute, daily, weekly, or even longer charts; you will always have an open, high, low, and close. The points between the open and close represent what is called the real body. Shadows are created by points that are the highs or lows of the individual candle time period. The real body will either be black or white (or other colors depending on the platform used). In the black or white example, white real bodies signify that the close is above the open…and conversely; the black real body would signify that the open is above the close. Note that it is possible for the high to also be the close or the open of a session. That would indicate that there would not be a shadow.
While understanding candlestick patterns, you as a trader would begin to understand the psychology of price action. Price action is a current indicator while many other indicators are lagging indicators…meaning, that will let you know what has happened in the past. Current indicators when combined with lagging indicators will significantly increase your odds of knowing what might happen next.
Candles and candlestick patterns will consist of one, two, or even three different individual candles. These patterns can be viewed as bullish, bearish, or neutral. These different patterns will also have different levels of strength. Learning Candlestick Patterns will enable the advised trader to view the markets in a clearer fashion. By understanding the current price action, and what story the candles are portraying will be the essential groundwork in advancing the trader to become a successful trader.
The steps needed to enhance this knowledge, and therefore potential trading results can be obtained with more information and educational products at Candlecharts.com.