Forex International

The fantastic thing about candlesticks is that you can see the direction of price movements at a glance. Not only do you see if the candle as a whole is above or below the prior one, but you can also tell by the colours whether it marked a reversal or a continuation of the trend.

Certain patterns are particularly important in learning how to read candlestick charts. In that case you don’t have a wick in one or both directions. If there’s no wick in either direction, this is called a Marubozu pattern. Then there is no candle body but only wicks stretching up and down from the horizontal line that marks the open and close. This is known as a Doji pattern.

If the body of the candle is long with short or non existent wicks, close to Marubozu, this indicates a fairly steady movement, possibly part of a trend. The colour of the candle will tell you whether or not it is an upward or downward movement.

On the other hand if the wicks are long and the body is short or non existent, more like the Doji pattern, this could indicate a troubled market with big fluctuations.

Naturally one candlestick on its own is not enough to form the root of a trading decision. You’ll always look at a sequence of candles. For example, you can draw trend lines along the highest highs and lowest lows on candlestick charts. When you understand how to read candlestick charts you can base systems around these prospects.