Share:

fxsoriginal

Hello traders! This week’s newsletter will give you a bit of insight into the power of candlestick charts, especially when applied to your largest timeframes. Let’s get started on how to read candlestick charts and when to use them!

First of all, candlestick charts show us four pieces of information, they are:

  1. The open (or first) trade of the time frame you are looking at

  2. The high – highest priced trade for that timeframe

  3. The low – the lowest priced trade for that timeframe

  4. The close (or last) trade of the timeframe you are looking at. If the candle body is green, the bottom of the body is the open and the top of the body is the close; if the candle body is red, the open is the top of the body and the close is the bottom of the body. The “wicks”, “shadows”, or “tails” show how the highs and lows are placed in relationship to the open and close.

There are numerous Lessons From the Pros articles written about the basics of how to read candlestick charts. If you are new to them please dig a little and then come back to this piece.

At Online Trading Academy we believe that you should be looking at several timeframes to formulate your plan for any individual trade. This week, I’m going to focus on using weekly candlestick charts to help us get an idea of what will happen over the following few days of the next week. Generally, I want to know what the weekly charts are doing because it gives me a HUGE hint on what the big institutions are doing with their trades/positions. I’m not too concerned with 5 minute candles; when you start looking at small timeframes like 5 minutes, you end up trading too often (at least I do). Personally, I would rather ride the coattails of long term institutions than sit at my trading screen for most of the day!

There is an old phrase in trading: “Amateurs control the open and pros control the close.” Hey, it even rhymes! What I want to see is the CLOSE of a candle very near the highs, or a close very near the lows. I also prefer the candle itself to be larger than the previous candle. Notice the red candle marked “1”. Its high was higher than the previous green candle’s high, and the low was lower – hence a bigger candle. See where the red candle closed? Almost at the very bottom of its entire range. Also, it closed lower than the previous two candles’ lows. This is a small hint that there is an imbalance building in our supply and demand equation, probably to the downside. Here is the lesson: a very low (or very high) close relative to the range of the candle very often points us in the direction of the FIRST HALF of the next candle. Said another way, when a weekly candle closes at/near the very low, the first few days of the next week will more than likely go lower as well.

GBPJPY

Now notice the red candle marked “2”. Many new traders will say that any red candle is bearish, but they would be incorrect. This particular candle is actually very bullish. As stated before, each candle shows the open, close, high and low. Notice the close vs. the low; that was a very strong move to the upside! As far as I’m concerned, there just wasn’t enough time in the week to close higher than the open, which would have given us a green candle. Notice how even the next candle (green) closed near its high, which leads us to believe the next candle will go in the same direction. Also, the very large next green candle closed near its high, leading us to believe the next candle would at least start off in the same direction.

Another helpful hint with these larger timeframe candles is to look at the lows of the candles in uptrends and the highs in downtrends. In both uptrends marked, the weekly candle lows had higher lows for several weeks at a time. Now, I’m not saying you would have bought the bottoms and sold the tops, but the first trend lasted from about 168.00 all the way to 189.50, and the second uptrend went from 175.00 to about 195.50. Not bad if you can pull out a chunk of those moves by paying attention to the weekly candle hints! In downtrends, pay attention to the candle highs. As long as the highs are still lower, this would lead you to believe that the downtrend is still intact. The two downtrends marked went from 187.80 to 175.70 and 185.00 to 175.00.

Obviously, no trend lasts forever. As the students of Online Trading Academy and the long time readers of these Lessons know, an uptrend will usually end at a significant supply zone and a downtrend will usually end at a significant demand zone. My hope is that by using these two candlestick charting hints, you will be able to pull out more pips when your chosen market is trending!

Until next time.

Learn to Trade Now

This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms

Follow us on Telegram

Stay updated of all the news

Join Telegram

Editors’ Picks

EUR/USD stays below 1.0900 as Q1 comes to an end

EUR/USD stays below 1.0900 as Q1 comes to an end

EUR/USD has lost its traction and declined below 1.0900 in the American session on Friday. Quarter-end flows seem to be allowing the US Dollar find some demand but the risk-positive market environment seems to be limiting the pair's downside ahead of the weekend.

EUR/USD News

GBP/USD trades below 1.2400, looks to post weekly gains

GBP/USD trades below 1.2400, looks to post weekly gains

 

GBP/USD has edged lower after having tested 1.2400 earlier in the day but remains on track to end the third straight week in positive territory. The upbeat mood remains intact after soft PCE inflation data from the US, making it difficult for the US Dollar to continue to gather strength.

GBP/USD News

USD/JPY retreats further from two-week high, slides below 133.00 post-US PCE Price Index

USD/JPY retreats further from two-week high, slides below 133.00 post-US PCE Price Index

The USD/JPY pair surrenders a major part of its intraday gains to a two-week high and retreats below the 133.00 round-figure mark during the early North American session on Friday.

USD/JPY News

Follow us on Telegram

Stay updated of all the news

Join Telegram

Editors’ Picks

EUR/USD stays below 1.0900 as Q1 comes to an end

EUR/USD stays below 1.0900 as Q1 comes to an end

EUR/USD has lost its traction and declined below 1.0900 in the American session on Friday. Quarter-end flows seem to be allowing the US Dollar find some demand but the risk-positive market environment seems to be limiting the pair's downside ahead of the weekend.

EUR/USD News

GBP/USD trades below 1.2400, looks to post weekly gains

GBP/USD trades below 1.2400, looks to post weekly gains

 

GBP/USD has edged lower after having tested 1.2400 earlier in the day but remains on track to end the third straight week in positive territory. The upbeat mood remains intact after soft PCE inflation data from the US, making it difficult for the US Dollar to continue to gather strength.

GBP/USD News

Gold tries to stabilize near $1,980 following earlier spike

Gold tries to stabilize near $1,980 following earlier spike

Gold price has returned to the $1,980 area following a spike above $1,987 with the initial reaction to lower-than-expected PCE inflation figures from the US. Meanwhile, the benchmark 10-year US Treasury bond yield stays in the red near 3.5%, providing support to XAU/USD.

Gold News

Will Dogecoin price pull an XRP and rally 60% next week?

Will Dogecoin price pull an XRP and rally 60% next week?

Dogecoin price has been in a tight range bound movement since November 22. The recent recovery above the range low looks promising and hints at an explosive move for next week.

Read more

Week ahead – Nonfarm payrolls to set the tone for US dollar

Week ahead – Nonfarm payrolls to set the tone for US dollar

With the banking turmoil receding, market participants will turn their attention back to economic releases. The spotlight will fall on the US employment report.

Read more

RECOMMENDED LESSONS

7 Ways to Avoid Forex Scams

The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?

What Are the 10 Fatal Mistakes Traders Make

Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.

Strategy

Money Management

Psychology