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Understanding Candlestick Patterns

 


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Candlestick charts or patterns are a way to analyze trading. Candlestick patterns were developed long ago in the 18th century by the Japanese. They indicate patterns in the market over a certain period of time. Today, many traders still employ this method as a way to analyze their trades and become more successful, especially when it comes to predicting the direction of a given market in the future.

The candlesticks that are indicative of a candlestick pattern are made up of a body that is either black or white, with an upper and a lower shadow that forms the wick of the candle. The wick represents the opening and closing trades, while the body represents whether the stock closed lower or higher than it opened. For instance, if the stock closed higher than it opened and experienced a gain, the body of the candle will be white while the wick at the top shows the closing price and the wick at the bottom represents the opening price. If the stock closed lower than it opened, you'll see the opposite effect.

Many trading platforms use candlestick patterns to represent the market, and it's a good idea to make the effort to understand these patterns as a means to becoming more successful as a trader. Candlestick patterns not only organize your information so that it can be properly analyzed, it can also help you to predict what will happen in the future, so that you can watch the trends and make informative and smart trades.

InterbankFX offers information on the candlestick pattern indicator and access to a pip calculator

Billings Farnsworth is a freelance writer.

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