Forex charts are used by traders to analyze the market and make informed trading decisions. One of the most popular types of charts used in forex trading is the candlestick chart. These charts display price movements in a way that is easy to read and interpret. However, not everyone knows what the red, blue, and purple dots on forex candles represent. In this article, we will explain what these dots mean and how traders can use them to improve their trading strategies.
Red Dots
The red dots on forex candles represent bearish price movements. A bearish price movement is one where the price of a currency pair is decreasing. When the opening price of a candle is higher than the closing price, a red candle is formed. The red dot is located at the top of the candle and represents the highest price reached during that period. This is known as the high of the candle.
Traders use red candles to identify potential selling opportunities. When a series of red candles occur, it typically indicates that the market is in a downtrend. Traders can use this information to enter short positions, which means they are betting that the price of the currency pair will continue to decrease.
Blue Dots
The blue dots on forex candles represent bullish price movements. A bullish price movement is one where the price of a currency pair is increasing. When the opening price of a candle is lower than the closing price, a blue candle is formed. The blue dot is located at the bottom of the candle and represents the lowest price reached during that period. This is known as the low of the candle.
Traders use blue candles to identify potential buying opportunities. When a series of blue candles occur, it typically indicates that the market is in an uptrend. Traders can use this information to enter long positions, which means they are betting that the price of the currency pair will continue to increase.
Purple Dots
The purple dots on forex candles represent doji candles. A doji candle is one where the opening and closing prices are very close together. This creates a small body with a long wick on both ends. The purple dot is located in the middle of the candle and represents the opening and closing prices.
Traders use doji candles to identify potential reversals in the market. When a series of doji candles occur after a long trend, it typically indicates that the market is losing momentum. Traders can use this information to exit their positions or even enter positions in the opposite direction.
Conclusion
Understanding the meaning of the red, blue, and purple dots on forex candles is essential for any trader who wants to analyze the market and make informed trading decisions. Red candles represent bearish price movements, blue candles represent bullish price movements, and purple candles represent doji candles. By using this information, traders can identify potential buying or selling opportunities and even predict potential reversals in the market. Remember, trading is all about taking educated risks, and having a good understanding of forex candles can help you do just that.
