How to Read Candlestick Chart?

Categories: Candlestick types.How to Read Candlestick Chart?

How to Read Candlestick Chart?

Hello…How are you?

Well, In this article I am going to cover one of the most crucial chapters in the field of trading i.e How to Read Candlestick Chart?.

Candlestick is no doubt one of the most important chapters for traders. therefore, it is very important that you should at least know the proper basics of the candlestick.

What is Candlestick?

Candlestick is also known as Japanese Candlestick has originated from Japan over 100 years ago even before the west countries developed the bar and figure charts.

The main face behind the Candlestick is the Japanese rice trader named Masaharu Homma.

He discovered that there was a strong link between the supply and demand of rice, and the emotions of the buyers.

Just like the bar chart, the candlestick shows the market high, low, open, close price for the day.

The candlestick has a wide part which is the body of the candle that represents the price range between the open and close of that day.

How to read Candlestick?

To illustrate Candlestcik here, I will use Binomo.

In case you don’t have Binomo account create a free Binomo account here.

You can also sign up via the form given below.

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Once you have signed you will land on the Binomo dashboard.

Click on the chart button to change the chart.

Now, click on the Japanese candlestick from the menu.

That’s it!!! The basic setup is over.

There are basically two types of Candlestick:

1. Bearish | Red | Seller Candle: If the opening price is above the closing price then the Red Candle is formed.

Example:

Suppose the price of the sugar today is Rs 40 which is greater than yesterday’s sugar price which was Rs 35.

Now, If you an intelligent seller you will try to SELL more and more. because of which Sellers will dominate the market and thus a Red | Seller | Bearish Candle will form.

2. Bullish or Green or Buyer Candle: Similarly, If the closing price is above the opening price then the green Candle is formed.

Example:

Suppose the price of the sugar today is Rs 35 which is lower than yesterday’s sugar price which was Rs 40.

Now, If you an intelligent buyer you will try to BUY more and more. because of which buyers will dominate the market and thus a green | buyer | Bullish Candle will form.

Talking about How to Read Candlestick Chart?, well, It’s damn very easy just remember this two golden rule.

1. Longer the body more is the clarity.

2. Shorter the body more is the confusion.

Example:

1. Small wick with Long Body

A long body always represents confidence.

Suppose, we see continuous Long body Green Candles it means that the buyers are really confident.

Similarly, If we see continuous Long body Red Candles it means that the sellers are really confident

2. Long wick with Small Body

Similarly, a Small Body always represents confusion or in confidence.

A Small body represents a confusion between BUYERS and SELLERS.

In some scenarios, It represents the change in trend.