how to read candlestick chart for day trading – An Easy to Understand Guide


So I have a chart in front of you and as you
can see it’s a simple line chart. Most people would recognize that we are going
from the lower part to the upper part. It’s been choppy along the way but this is
a basic line chart and most people even outside of the trading community would recognize what
this means. However when we trade financial instruments
we have the ability to trade several different chart types in this particular video. I’m going to look at Candlestick Jarding. This is probably the most common type of charting
and the forex markets for example. It is becoming more popular with stocks and
commodities as well so it certainly makes sense to understand them on the candlestick
chart. I’ll go ahead and switch over to that. Now you can see things change quite a bit
again. It still looks choppy it looks like we’re
rising but we have cullers now. Now the first thing that I would say about
Candlestick charting. Normally you will see like black and white
red and green blue and white maybe the idea is that the darker of the two is negative
and the lighter of the two is positive. So if you get a black and white chart the
negative candles will be black for example. So the first thing that you see is that we
have been grinding away to the upside for some time now. But here recently we have fallen and you can
see this confirmed by several red candles may go ahead and zoom in again and to get
a better look at these candlesticks. Question then becomes how do you read them. Well there are a couple of different things
to look at when you have a candle stick and I’m going to focus on this one right here. You have a body so you know that it went higher
during the session. So. The bottom. Tick here of the body will be where we entered. And the top would be where we. Exited this time frame. You can see that we started and then went
higher. So for example over here. On the left hand side this is where we started. And that’s where we ended because it’s red. So that’s how you know in this case green
means that we rose red means that we fail. You can see that these two Candlesticks are
fairly similar in their shape but they were in opposite directions. And looking at these there are a couple of
other things that you want to pay attention to. There are the Wick’s of the candles. And that is. The little lines above and below. They don’t have to be there. What this means is the highest level that
you had reached during that Candlestick is there and the lowest there each Candlestick
represents a specific amount of time. In this case I haven’t said at the daily. So this was the range of the Eurodollar for
that day because of the ability to glance and see the color coded part of candlesticks
is very easy to tell you know how the mark has been behaving lately. I’ll switch to a 15 minute chart and you can
see that this part of the day was very negative. This part of the day was very positive. We went back and forth. When I go to weekly you can see that we have
been grinding higher over the course of several weeks. But you can also see that we get positive
action for a little while a little grind lower positive again to grind lower so there’s a
different ways to look at this. This is the monthly chart and you can see
that there were several months of negativity in the euro. Now it seems like we are consolidating overall
for the longer term perspective. There are a lot of different ways that you
can read candlesticks and that is definitely beyond the scope of this video. This is just simply to show you exactly what
part off each bit of the candlesticks means so you have the entry on the left hand side
which is always going to be in the left hand side. Then you have the exit on the right hand side
depending on the colour depends on or shows how the candlestick plays out. So you can have a candlestick that has a body
like this and it’s red. Well that’s negative. Or black or your darker color or whatever
you choose a lot of times you can change that in your platform. So this means that you started here and you
ended there and the Wick’s just show how much volatility there was how much farther outside
of that open and close range you ended up so when you go back to the line chart you
can see that yes it tells you that we you know we’re in these areas but this simply
just plots died and then basically connects it at the close price. This tells you the actual action during that
day some candlesticks and as you go through your training the candlesticks will tell you
specific things they’ll tell you perhaps there might be more strength and weakness. Even though there was not much of a body. So this Candlestick here you can see we opened
up here on the left hand side and we closed on the right hand side. Basically the same price we did fall a little
bit and we rose quite drastically. But the thing I would bring to your attention
here is that we did not hang on to the gains the body is almost non-existent. So this means that we trying to rally and
failed. That shows that perhaps the buyers don’t have
the strength that they had shown earlier in the day they couldn’t keep those gains. This is why Candlestick charting is so powerful
and because it gives you more than what the line does because with a bar you see the same
thing and the candlestick you see the color coding and with the line all you see there
is that we were close there. You don’t see that we tried to rally and failed. So that’s what makes the candlestick so potent. You know you can also see things like you
know we had a fairly positive candle close towards the top of that range. That normally means that the buyers are firmly
in control. A lot of it comes down to the psychology of
what’s going on. So remember the color determines which part
of the left is the beginning and which part of the right is the end and of course the
wicks show the volatility during that timeframe.

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