Forex candlestick charts
Forex traders analyze currency pair data on a unique graph
known as the Forex Chart that has candlesticks, which represent the price
action.
Each candlestick represents what has happened to the price
in a specific period of time.
In the trading platform, you can set a custom time which
each candlestick represents. This is known as setting a time frame.
How to interpret a candlestick
A candlestick has a body and one or two wicks(shadows).
The body represents the price range between the open and
close of the candle. For example, if you had set a timeframe of 1 hour, each
candle will show the price level when a certain hour started and when the hour
ended.
The wicks will show the maximum and the minimum price level
during that time frame.
In the diagram above, you can see that the candlestick shows
a lot of market price data in a simplified way.
From the candle, you can identify the maximum price reached
during the time frame, the closing price, the opening price and the minimum
price reached.
Types of candlesticks(candles)
There are two types of candlesticks. These are:
- A bullish(bull) candle.
- A
bearish(bear) candle.
Well, how do you differentiate between a bull candle and a
bear candle?
Simply, it’s just the colour.
At most times, the default colour of a bull candle is either
green or white, while for the bear candle it’s either red or black.
You can customize the colour and the timeframe in MetaTrader
4.
Because a bear candle shows decrease in price of the base
currency, you can see that the opening is higher than the closing of the
candle.
The bull candle, shows increase in price of the base
currency, hence the closing is higher than the opening of the candle.
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