Candlestick Forex Strategies
One of the most important aspects of Forex strategy is to use candlestick technical analysis. With the help of this method, you will be able to increase your chances of predicting movements of assets in the Forex business.
Using candlestick Forex Trading strategies is useful in predicting the future movement of assets based on the influence of traders’ and speculators actions performed. As you know, the movement of an asset can also be influenced by the trading behavior of financial traders.
For example, if a huge number of traders decide to sell an asset, then the value of that asset is expected to drop. If a huge number of people decide to buy an asset, then the value of the asset will increase.
Using candlestick technical analysis traders will be able to predict the future movement of an asset based on the overall market sentiment and trader action on a particular asset. Read the article below in order to learn how this works exactly.
What are Candlesticks in Forex?
Candlesticks are indicators in financial trading including Forex that will reveal the movement of certain assets based on the actions performed by traders during a particular moment in time. Imagine the following example:
- The value of an asset is at $100 during a given moment.
- 1,000 people decide to sell the asset bringing the price down to $90
- 10,000 people decide to buy the asset increasing the final price to $92 after a few minutes
- After further 30 minutes, the value of the asset becomes $110 because of the high number of buys
Using normal charts, in the initial few minutes you would have only been able to notice that the value of the asset has decreased dramatically. Seeing this, you would have most likely bet on the outcome that the value of the asset would continue to decrease even further.
As such, you would have lost money in the example above since the value actually recovered and reached an even higher value than the initial value.
What if there would be a method that would reveal you the ratio of people selling and the ratio of people buying the mentioned asset? – If this would be possible, then you would have been able to see that a huge number of people decided to buy after the price dropped, meaning that the price was expected to increase in the future.
This way after the drop from $100 to $90 you would have been able to tell that the price would have INCREASED from here on rather than continued to decrease. You would have been able to purchase the right Forex contract in this case.
Well, doing EXACTLY the thing mentioned in the above paragraph is actually possible using candlesticks in Forex.
In order to understand how this works, first you will have to know what a candlestick is made of. Below you will find the elements that make up a candlestick.
The real body
The real body or body of the candlestick is the rectangle in the middle of the candlestick. The length of this rectangle represents the size of the movement caused by trader action. For example, if the body is short, it means that the value of the asset has only increased/decreased slightly. A long body denotes a large charge in the value of the asset.
The shadows
The shadows are the lines on top or on the bottom of the real body. The length of the line denoted the number of traders and trades that were necessary in order to determine the movement of an asset.
For example, a very long line on top means that a very large number of traders have decided to buy the given asset. A long line on the bottom means that a large number of people have decided to sell the asset.
Red vs. green
Each real body also has a color, most commonly either red or green. A red color means that the value of the asset was decreasing. A green real body means that the value of an asset has been increasing.
Some Forex brokers do not use the colors red or green in order to represent the direction of candlesticks. The most common alternative is white and black where white represents an increase while black represents a decrease.
The length of the real body
As hinted above, the length of a real body denoted the size of the increase or decrease in the value of the asset. A long red real body means that the value of the asset has decreased a lot in a very short time frame. A very long green real body means the opposite of this.
The length of the shadow
The length of the shadows denotes the number of traders and number of trades that were executed for a particular position. A very log shadow on top of the real body means that a lot of traders have bought the asset in question.
A very long shadow on the bottom of the real body indicates that a of of traders have suddenly decided to sell the asset in question.
Predicting the Movement of Assets with Candlesticks
Now that you know what candlesticks actually are in Forex Trading and how to read them, we will reveal you how you can use them in order to predict the future movement of an asset. There are basically two main strategies that work best. These are Pin Bar and Inside Bar.
Master the Candlestick Strategies and you will be successful and your Forex account will grow and you will earn a substantial income as long as you follow this winning Forex strategy correctly. This is one of the best Forex winning strategies on the internet.
Master just a few of our Forex strategies by practicing them on a Forex demo account from one of the best Forex brokers and you will be successful. Your Forex account will grow and you will earn a substantial income as long as you follow the winning Forex strategies correctly. These are some of the best Forex winning strategies on the internet.