How To Read Candlestick Chart. One way to analyze a technical basis is to read a candlestick chart. According to technical analysis, from data provided candlestick that has developed, we can predict what the next candle is formed. Whether candle Candle up or down. So if we have an overview of what will be the candle is formed, we can take a decision as to whether buy or sell.
So, here's how to read a candlestick chart:
In psikology, the candle is formed due to pressure sales and impulse purchases. The magnitude of the difference pressure and encouragement is what then causes the form candlestik are different from each other.
Candlestick formation chronology:
- When there are a lot of buyers who make a purchase price, the market grew so that by the end of the period the market closed above the opening price, eventually resulting in the Rose candle (green).The magnitude of the impulse to buy can be measured from the movement of the market from Low to Close. The greater the motivation, then the greater the body candle is formed. So the magnitude of the Green candle body shows the dominance of the buyer.
- When many traders who make sales market, the price of getting down, so at the end of the period's closing market value usually below the opening price. This is the condition which causes the candle that is formed is red (down).The candle Down (red) High measured from the seller pressure up Close. The greater the pressure sales, then the prices will fall more and more form the body of a long red candle. So the magnitude of this red candle body shows the magnitude of the domination of the seller.
To determine the direction of the next candle, there are some that should be noticed. Ie:
- The Resistance
- Acceleration of Motion
- The Deceleration Rate
- Reverse Direction Experiment
- Converging
The Resistance
The Point is when one party dominates the market then the candle will be moving in the same direction.For example, when Buyers dominated the market so the candle will continue to ride in the same direction.As long as there is no resistance from the seller (which means no sales) candle formed following the direction of the previous candle.
Until one day some traders felt the price was too high or already too saturated, it appears that the sales action as a form of resistance from the seller. One of the reasons is the action of profit taking.
Forms of resistance shown by the tail of the candle.When the resistance is greater than dominance, then the next party who do resistance had won and there will be the turn of market dominance, so that the trend will reverse direction.From here we can predict that the next candle will reverse direction as well.
Acceleration of Motion
The body of a candle that is larger than the previous candle showed an enthusiasm. Then when many traders who berantusias the opening position, this will result in an effort to drive the market so in line with the kind of enthusiastic about it. Moreover, there is no opposition, then we can predict the candle to be formed in line with the candle wax.
The Deceleration Rate
The opposite of enthusiastic, the doubts of traders to open a position lead market moves to slow down. Doubt this comes as traders assess market is already too high, too low, or a saturated market conditions are in the zone support & resistance. In the absence of the trader opens a position, then there is no power to drive the market.
In these conditions we should be ready to open the turning direction of the position, because the market will be taken over by one of the parties.
Reverse Direction Experiment
On the position of the saturated market there will be a party that tries to end a trend going on, who want to reverse the direction of a trend right. But sometimes the effort begins with a test condition, i.e. testing whether the market could really behind point or not. It is characterized by the long tail of the candle the opposite to the direction of the trend is going.
Chronology is before the period ended as will form the opposite direction with candle candle before.Towards the end of the period the candle was withdrawn and closed to be in line with the previous candle.
The existence of the turning direction of the trial indicates the turning direction is going to happen. So in this case we can prepare ready open positions against the trend.
Converging
Slowing body candle and a resistance (number 2) showed that the majority of traders expect the market's turning direction. But when it suddenly appeared a candle which showed enthusiasm remains in line with the trend that is happening (moner 3), this is questionable.
Can be likened to when everybody wants one thing, but there is one people want different things, then of his energies, energy one is actually small and virtually empty, so it is very easy to overcome.
Convergent condition this candle can also happen because there are certain parties who want to get the best price, although already know the market will reverse direction, but still only drew him into a higher or lower first to get a better price, then market behind point.
In these conditions, we see other indicators, if other States converging indicators as well, then we can open a position contrary to the trends that happen.
A line chart uses only the end of day closing prices. It does not care what the price movement was during the day. A candle chart is constructed with four price points per day. The open, close, low and high points.watch here
ReplyDeleteYou’ve got some interesting points in this article. I would have never considered any of these if I didn’t come across this. Thanks!. Candlestick analysis
ReplyDelete