(Last Updated On: 2nd July 2021)
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Hello…How are you? Well today in this article, I am going to cover one of the most important chapters for trader’s i.e How to Read Candlestick Chart?
No doubt, How to read Candlestick? is one of the most important skills that every trader must know.
What is Candlestick?
Candlestick is a graphical representation of the price movement of stocks, commodities, & more.
The chart is said to be developed by Munehisa Homma, a Japanese Rice Trader.
However, the chart was introduced in the western world by Steve Nison, when he wrote a book named the Japanese Candlestick Charting Technique.
How to Read Candlestick Chart?
Here, To illustrate Candlestick Chart, I am going to use Olymp Trade
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Once you have signed up with Olymp Trade now, you will land on the Olymp Trade dashboard.
Now, click on the Chart button. and select Japanese Candlestick from the given menu.
That’s it the basic setup is over!!!
Now, talking about How to Read Candlestick Chart? well, it’s damn very easy
The candles are commonly formed as High, Low, Open, & Close.
There are basically 2 types of Japanese candlesticks:
1.RED or Bearish Candlestick
2.GREEN or Bullish Candlestick
The basic funda of Candlestick says:
If the opening price is above the closing price then a RED or SELLER Candle is formed
Similarly, If the Closing price is above the Opening Price then a GREEN or BUYER Candle is formed.
To understand this concept more clearly, let me tell you an example,
Suppose, The price of Rice today is 20 Rs per kg which is more than yesterday’s price which was 17 Rs per Kg.
Now, If you are an intelligent seller you will get excited and try to SELL more & more, and thus Bearish Candle or SELLER Candle is formed.
Similarly, Suppose, The price of Rice today is 20 Rs per kg, and the next day the price drops down to Rs 16 per Kg.
Now, If you are an intelligent Buyer you will get excited and try to BUY more and more. thus a GREEN Candle or Bullish Candle (BUYER Dominated Candle) is formed.
How to Read Candlestick Pattern?
Now, In this section, I will teach you the most easiest Cheatsheet on How to Read Candlestick Pattern?
I bet no one will ever teach you this easy trick.
Firstly, note these important points before we begin:
- Each Candle represents a fight between BUYER and SELLER.
- Bull = Buyers or Green Candle
- BEAR = Sellers or Red Candle
- The longer the body more is the clarity
- The longer the wick more is the confusion.
To be honest there are only three Common Candlestick Patterns that most appears.
1. Small Wick with Long Body
As said earlier, the Longer the body more is the clarity.
This means, that either the BUYERS or SELLERS are really confident therefore a strong green or red candle is formed.
Price Action: If we see a continuous strong green candle then we should take a buy trade.
Similarly, If we see a continuous strong red candle then we should take a sell trade.
2. Small Wick with Small Body
This type of candlestick suggests that there is some confusion between buyers and sellers.
Price Action: Trading with this type of candle is a bit risky. However, if you use support and resistance
then the risk can be minimised.
3. Long Wick with Small Body
As said, Longer the wick means more confusion.
Similarly, This pattern indicates the confusion between buyers and sellers.
This type of candle basically signals the chances of a trend reversal.
This is the end of this article. I hope you have found this article helpful.
So, Reading and trading with a candlestick is that easy. you just need to remember this three patterns and how it works.
This article was all about How to change chart type in Olymp Trade, How to use Japanese candlesticks in Olymp Trade, How to change to Candlestick on Olymp Trade.
Best of Luck 🙂