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How to read candles forex?

The forex market is a complex and dynamic marketplace that requires a lot of knowledge and skills to navigate effectively. One of the essential skills that every forex trader must possess is the ability to read candlestick charts. Candlestick charts are a popular tool used in forex trading to analyze price movements and predict future trends. In this article, we will explain how to read candlesticks forex and how they can be used to make informed trading decisions.

What is a Candlestick Chart?

A candlestick chart is a type of financial chart used to represent price movements of an asset over a specific period. It consists of a series of candlesticks that represent the open, close, high, and low prices of an asset within a given period. Each candlestick is formed by a rectangular body and two lines or wicks at the top and bottom.

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The rectangular body of the candlestick represents the opening and closing prices of the asset. It is colored differently to show whether the price has increased or decreased during the period. If the price has increased, the body is typically green or white, and if it has decreased, the body is typically red or black.

The lines or wicks at the top and bottom of the candlestick represent the high and low prices of the asset during the period. The length of the wicks indicates the range of the price movement, while the length of the body shows the strength of the price trend.

How to Read Candlesticks Forex

Reading candlesticks forex is not as complicated as it may seem. Here are the essential steps to follow:

Step 1: Identify the Trend

The first step is to identify the trend of the asset. A trend can be bullish, bearish, or sideways. A bullish trend is when the price of the asset is increasing, a bearish trend is when the price is decreasing, and a sideways trend is when the price is neither increasing nor decreasing.

To identify the trend, look at the candlesticks and check if they are predominantly green or red. If the candlesticks are mostly green, it indicates a bullish trend, while if they are mostly red, it indicates a bearish trend.

Step 2: Identify the Support and Resistance Levels

The support and resistance levels are significant price levels where the asset’s price tends to bounce off. To identify these levels, look for areas where the price frequently reverses or consolidates.

Support levels are areas where the price tends to bounce off and move upwards, while resistance levels are areas where the price tends to bounce off and move downwards.

Step 3: Look for Candlestick Patterns

Candlestick patterns are a powerful tool for forex traders. They are formed by a combination of candlesticks that indicate a possible reversal or continuation in the price trend.

Some of the popular candlestick patterns include:

– Hammer: It is a bullish reversal pattern that indicates a possible end to a bearish trend.

– Shooting star: It is a bearish reversal pattern that indicates a possible end to a bullish trend.

– Doji: It is a neutral pattern that indicates indecision in the market.

Step 4: Analyze the Candlestick Bodies and Wicks

Analyzing the candlestick bodies and wicks is critical in understanding the price movement of the asset. A long body indicates a strong trend, while a short body indicates a weak trend. A long wick indicates a significant price movement, while a short wick indicates a minor price movement.

Conclusion

Reading candlesticks forex is an essential skill that every forex trader must possess. Candlestick charts provide valuable information on the price movement of an asset, and understanding them can help traders make informed trading decisions. By following the steps outlined above, traders can identify trends, support and resistance levels, and candlestick patterns that can help them predict future price movements.

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