Forex Game Nation

Understanding how to read candlestick charts is needed for both stock trading and foreign FOREX trading. Candlesticks are a record of price movements that can help a trader to identify trends and spot approaching breakouts and reversals or retracements. Many traders can develop profitable trading systems about entirely on the basis of candlestick charts, and many more systems rely on them as a first or primary signal.

The chart is made up of a collection of blocks or candles, each one showing the open, close, low and high costs over a period. These can be costs of anything: stocks, commodities, currencies or whatever. The open and close prices might be the prices for a day’s trading but mostly you have control over the period and you can set your chart to show a candle for each hour, for 5 minutes or whatever. If you are planning systems around this type of chart you’ll probably want to check your signals over more than one period of time before you open a trade.

If shown in monochrome, the candle will be unshaded or white for an amount that rose in the period. In this situation the open price is the bottom of the candle’s wide block and the close price is the apex of the block. If the price slipped in the period, the body of the candle will be shaded, either black or a color. In this example naturally the higher edge of the body is the open price and the lower edge is the close.

In either case, the high in the period is the pinnacle of the vertical line or wick stretching upward from the pinnacle of the block. The low during the period is the bottom of the vertical line or wick running down from the base of the block.

Some charts nowadays are shown in two colors. You may have green or blue for a bullish period when the price was rising and red for a bearish period when the price was falling.