Elementary Forex — Candles in the Wind

Junior Investors and Traders alike can always use new insights.   Most people use the Candle Charts but rarely understand what detailed information you can find in them.  Let’s review the basics and the advanced of a candle chart:

For our purposes we will review the section with the two vertical lines — the seven day period 11/20 to 11/27.   We are looking at a daily chart and so first we must understand that the candle chart here will help us understand each day’s market stress, up, downs, pressure, and finally open and closing trades for the currency paid EUR/USD.

In the above chart, we colored red for the bearish positions, and yellow for the bullish positions.  In each candle you should notice the section of the bar, called the body and lines above and below (vertically) from the bar called the wick.

Here is what we can see for each body and wick:

1.  Bullish candles mean a market push for buying, and the long the candle the more pressure.   The bottom of the candle means the open position and the top means the closing position for the day.

2.  Bearish candles mean a market push for selling, and the long the candle the more pressure.  The bottom of the candle means the closing position and the top means the opening position for the day.

3.  Wicks on the top show buyers testing the bullish positions and as it is longer there is more testing.

4.  Wicks on the bottom show buyers testing the bearish positions and as it is longer there is more testing.

5.  Long wicks with very little or no body are called dojis.  A doji is a sign that the market is indecisive, but could be a trend reversal in the very near future.

So, the day these candles and wicks tell you the market expections and trends on each day.

Often investors want to see what is happening for an hour or even less, and these same candles will be used for the same purposes.   Trends likely are larger candles.  Potential trends are likely the wicks.