Candlesticks may seem simple and straightforward, but there's a lot of information embedded in each candle. It's exactly this information that can help a trader make the right call for what the market is going to do next. The next step is to capitalise on that prediction. That's why we're traders right?
Understanding Market Direction with Candlesticks
The analysis of candlesticks to predict the market direction is what you can use as part of pretty much any forex trading strategy. You can use it as a confirmation tool that triggers the trader to enter or exit. That can, however, be tricky, as your trading can become to emotionally influenced and impulsive.
Using Candlesticks to their full potential
Imagine you're in a sellers market or a downtrend. The last candle suggests that at some point while the candle was open the buyers tried to push the price up. This is what the long wick on top indicates. However, before the candle closed the sellers took over again and pushed the price back down. This is shown by the body close that has turned red (if red is the colour you use to indicate sellers). Ask yourself, would you sell now?
Not so much information right? You only know that you have the trend with you and that buyers in the last candle are weaker than sellers.
Forex being a game of odds, you need to put the odds in your favor. So figure out what the story is. Read the candles one by one, from left to right. And take your time to read them. Each of them have information and you want to extract as much information as you can. This way you'll get the most complete story.
Final words
You can extract information from candlesticks to build a story to determine the market direction. Getting the complete story is just one step, albeit a very important one. Reading and understanding the charts is very important. You can always add more tools that put more odds in your favour. The tricky part is to find the confluence in doing it all right. This comes with years of experience and loads of education. Amassing education and experience is a process that will never stop for as long as you're a trader.
Watch the video above for the full lesson so you can continue to enhance your skills and be better everyday.
#UrbanForex - Be conscious of your trading!
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Editors’ Picks
EUR/USD stays near 1.0850 after US housing data
EUR/USD trades in negative territory at around 1.0850 in the early American session on Tuesday. The US Dollar preserves its strength following the upbeat housing data and makes it difficult for the pair to gain traction. The two-day Fed meeting goes underway on Tuesday.
GBP/USD recovers modestly from two-week lows, trades near 1.2700
GBP/USD staged a modest rebound after touching its lowest level in two weeks below 1.2700 on Tuesday. The cautious market mood helps the US Dollar hold its ground and limits the pair's upside as markets gear up for the Fed and the BoE policy meetings.
Gold stays in daily range near $2,160
Gold fluctuates in a narrow band at around $2,160 for the second consecutive day on Tuesday. Ahead of the Fed's policy announcements, the benchmark 10-year US Treasury bond yield moves sideways near 4.3% and limits's XAU/USD's volatility.
Why is the crypto market crashing?
The two most important contribution to the ongoing bull market is the meteoric rise in Bitcoin due to the ETF approval and the sudden interest spike in Solana ecosystem. But the recent move suggests that the upward momentum is dissipating and a correction looms.
Shocker, Yen weakens after BoJ hike
The Bank of Japan (BoJ) scrapped its negative rate policy, raised the rates from -0.10% to 0%, ditched its YCC policy and ended the purchases of ETF and Japanese real estate investment trusts.
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