What are Candlestick Charts and How to Use them for Trading? - Binoption
What are Candlestick Charts
A perfect mix of bar graph and line chart is candlestick charts.
This is used typically to depict the information that is made available in both.
Usually these charts are used to inform traders what the market condition is and whether it is bullish or bearish.
Based on these signals from the candlestick charts trader will prediction future price movement of a particular and asset and accordingly invest.
Thus the most crucial part what a trader should check if how are these signals generated and how reliable are these signals?
Over 80% of traders totally rely on the signals and will barely invest anytime to check if the information transmitted through these signals is 100% valid.
In order to make sure the investment is safe; our expert team conducts survey to check how information is gathered into signals and how much percentage is reliable.
Basically information into signals will be either manually updates by expert traders or it is done automatically based of statistical and mathematical calculations of technical and fundamental analysis.
Among the various tools, Candlestick charts are used by trader for this analysis.
Detailed explanation of this tool is below:
Candlestick charts are named after the thin bars that are used to display the closing and opening stock price along with its high or low range which look like a wick of the candle.
Just like line graphs, these candles will be arranged in the graph.
But they include lot more information unlike a line graph.
The two major parts of candle stick graphs are:
A filled in rectangle box which looks like a candle is used to indicate whether the stocks are opening and closing above or below to initial selling price.
Based on this information traders will predict the future of the stock and will take a call where to invest in the stock or not.
The longer the graph is it means either there has been selling or buying is affected by the behavioral pressure in the market.
Candlestick charts will be mostly in red and green, while the red color candles represent the closing of the asset price is lower than the opening price of the market.
And the green color candle represent that the closing of the asset price is higher than the opening price of the market.
And the price movement is depicted by the size of the bar, the thicker it is, higher is the price movement.
Also known as shadows are lines on the top and bottom of the candles.
These lines are representing the lowest and highest point of the asset at a particular period of time.
Shift in the behavior is shown by long wicks and the top of wicks usually represent the high price of the asset traded.
Using Candlesticks for Binary Options:
Traders have started to notice in the recent past, market trends are very good factors to predict the future events.
And by just taking a look at the candlestick charts traders will be able to decide whether it right to book a binary option on a particular trade or not.
All of this is considered as a strategy and it is named as price action strategy.
And it is one of the best ways to learn about binary for both new and experienced traders.
Terms and Chart Patterns: There are a lot of types of charts and graphs with the candlestick tool itself and each of these have independent features and offer distinctive facilities.
Some of the very common ones are:
It has a cross like appearance and it’s a single candle which will represent the slight difference between closing and opening prices.
This is considered as an indicator for the yet to occur change.
On the basis of this trader make predictions and execute trades.
When a small body candle is followed by a long body candle, this indicator comes into play.
It basically means a bullish and bearish market where the small candle will get fully engulfed with the big candle.
When this candle is found to be in an upward trend it means bullish market and when in downward trend, it signals bearish market.
Shooting star and Morning star:
As an indicator for the market turning to be bullish, morning star candles are used.
In this type of indicator a small candle will be sandwiched in between two long candles in a downward trend at the bottom and shooting star is the opposite of morning star;
Here it represents the bearish market with upward direction at the top.
As this candle will take the shape of a candle to represent move of the market price from the lower point onwards it is called as a hammer.
When the market price moves in the opposite direction it is called as reverse hammer.
One of the common candles in this with the wicks on both ends of the candles, these are usually seen in the middle of low or high market trends.
And this comes into play when there is high uncertainty in the market on price movements.
It is possible for every trader to start using this chart for binary option trading analysis.
It is one of the best tools that can be used by traders to analyze price movements in details.
Plus it save a lot of time as you need not compare between two charts line and bar graphs to get the detailed picture.
In order to activate this, trader should go to their trading account platform settings and opt for candlestick charts along with other charts and graphs that are required to analyze the market.
Of course, traders can analyze the market without any of these charts, but the alternate is trader getting the information through articles and news.
Know the details of Binary Option Trading Checklist which are important for any traders.
This is not considered as a best move as it will be a very time consuming process with additional efforts.
Thus make use of the charts and graphs to get the necessary information within fractions of seconds!