What is Candlestick Chart?

By | February 24, 2016

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Candlestick charts has become very popular among traders. We can see that it creates a perfect mix between a bar graph and a line chart portraying more information in detail than is typically available with either on their own. Generally, these charts can be applied as a signal to investors whether bulls (the buyers) or bears (the sellers) dominate the market. In trading binary options, it is essential to know how these charts can be useful and helpful for the aim of predicting the best points to buy and sell.

What is Candlestick Chart? How Can I Read One?

Candlestick chart is a chart that displays the opening and closing stock price and its high/low range which is similar to the wick of a candle.

In this type of chart, candles are arranged along a chart, in a pattern resemble to a simple line graph; however, they include more information than a simple line graph can provide.

The Bars – Respectively, every candle is created by an empty or filled in rectangle indicating whether the stock closed above or below its initial selling price. A longer body symbolizes either increased buying or selling pressure due to the behavior of investors during the period of time. Most candlestick bars have two colors including red and green. With red bars, it means the assets price closed lower than it opened for that period of time. In contrast, green bars show that the asset closed higher than it opened for that period of time. The size of the bar symbolizes the price movement of the asset from open to close.

The wicks, also known as shadows, which is on the top and bottom of each candle is a line. This line shows the highest and lowest points reached by the asset during that particular period of time. Long wicks have a tendency show a shift in behavior. Either buyers drove prices up and after that, trading slowed as investors denied payment for the high prices, or vice versa. We see the top of the wick is the high price the asset traded for during that candle. The low wick is recognized as the lowest price the asset traded for during that period time.Candlestick2

How Can I Apply Candlestick Charts to Trade Binary Options?

With the flow of time, investors have started to have awareness that recurring market trends are commonly a trustworthy predictor of events to come. Thus, it will be helpful for you to decide whether it is the right time to purchase or sell your binary option by looking for these indicators on a candlestick chart. The strategy is known as price action trading and it is also the predominate way that the seasoned traders recommend learning and trading binaries successfully.

Popular Chart Patterns and Terms

When you are more familiar with binary trading you will know a great deal of these patterns. There are many candle types over at stockcharts.com which has a quite comprehensive library. We do not rehash all of them here. However, these are some of the ones we see most popular below. We also created a page for updating and adding more and more popular candlestick chart patterns.

Engulfing
This happens in case a candle with a very small body is followed by a candle with a body that is larger at both ends; so, the second candle totally engulfs the first candle. It has a tendency to signal a bullish market when appeared at the top of an upward trend, or a bearish market when appeared at the bottom of a downward trend.

Doji
A Doji is known as a single candle within little change between the opening and closing prices, therefore creating a cross-like appearance. It is a sign of hesitation in the market and can become an indicator of change to come.

Morning Star & Shooting Star

These signals occur to represent opposite indicators to a reversal. Morning Star happens when a candle with a short body appears between two long bodied candles at the bottom of a downward trend – it is seen as the indicator that the market is turning bullish.

In contrast, Shooting Star is a short body candle having a long shadow happens above a longer bodied candle at the top of an upward tendency. This is showing a sign that the market is to become a bear market.

There are more signals to the market that can be appeared in a candlestick chart. However, you can train yourself to find these changes when purchasing binary options and invest wisely by learning a few at once.

The Hammer

So not Seven Duece in poker, we are mentioning about a pattern indicating an extraordinary move to the low side after open, but a rally well above the low point for the candle. This has a result with a long lower wick with a square at the top that sort of as a hammer. The reverse is named the inverted hammer.

Spinning Top

It is a common candle having long wicks on both ends and an open and also close near each other and virtually in the middle of the highs and lows. Generally, this is a sign of uncertainty in price movement.

How Can I Get A Candlestick Chart?

In case you have an account at a brokerage, for instance, ThinkOrSwim.com, they always have charting packages. And one of our favorites is FreeStockChart.com. All you have to do is to get the candlestick chart to show up by click on Settings, Plot Style, and Candlestick. Wah-lah.

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