Unlike traditional bar charts used for stock market analysis, the candlestick chart gets its name because each bar resembles a candlestick with a potential wick on the top or bottom.
Last update 2020.08.05
The most popular visualization of asset prices is the candlestick chart. Its popularity is due in part because it is easily interpreted and can show patterns to support decision-making in trading. Let’s learn the candlestick patterns you should know to improve your performance in forex trading.
Each candlestick bar conveys four points of information, in addition to representing a particular time period of analysis. Examples of candlestick time-frame include the following, where each bar represents a specific amount of time:
In most broker trading-tools such as charting platforms, the candlestick time-frames range from one-second up to one-month per candlestick.
It is also important to know the color scheme used to easily read candlestick charts. We normally use green and sometimes blue on a candle to show upward movements of price and red to depict the downward movements.
As mentioned earlier, there are four points of data that each candle conveys, known as Open High Low Close (OHLC), but are only completed once the candlestick bar time-frame has passed.
The market open price and close price of the session will be the top or bottom of the candle, while the high and low prices reached during the candle time-frame will be potentially shown as candle wick lines, unless the high is equal to the open or close, or the low is equal to the open or close. In other words, some candles don’t have any wick because the low or high was the same price as the open or close.
The larger area of the candle, or the body is formed from after the price opening in that period and is completed at the price of closing. This means that If the closing price is higher than the opening price, the candle will be green, otherwise it will be red if the closing price is lower than the open.
Analyzing candlestick charts
The thinner line, known as the candle wick, which is above or below the candle body shows the maximum and minimum price reached during that candlestick period. And while you may see lots of information in one image, it makes it easier to understand how the prices behaved during that time by reading the candlestick charts.
Here we can see a typical broker screenshot of FXCM.com for the EUR/USD forex pair.
When analyzing candlestick charts, the graph shows price history available across various time-periods where the trader can start to look for patterns. There are various chart and candlestick patterns, known as technical analysis, which can help identify and signal the right moment to trade.
In addition to finding trends, there are also indicators of counter-trends, and various candlestick patterns such as the Hammer, Pin and Doji, to name a few. Overall, there are hundreds of classical indicators available to analyze the price direction for forex pairs.
One helpful exercise for beginners is picking a forex pair and trying to find as much of a pattern as you can. Try to see how many times it really came just before a change in price behavior.
If you investigate on the internet and into the literature, you will find thousands of patterns applicable to charting and candlestick charts.
Despite the large number of indicators, it can be confusing for traders to analyze charts. This is why Artificial Intelligence (AI) is becoming more popular for its use in financial markets by trading professionals. Unlike humans, AI-powered applications can quickly analyze very large data sets and compare countless candles to precisely infer where a pattern occured or not.
Wiseinvest finely crafted an AI-powered forex trading agent which supplies information about when and in which forex pair one of those patterns occurs. Then it emits a signal to the user in real-time so they can act on the opportunity.
WiseInvest was created out of the belief that we can help people save time by using AI to do the work for them of identify trading opportunities.
By using Wiseinvest automated AI trading and AI forex signals, you don’t need to spend hours analyzing candlestick charts when trading forex. We send all information to you to set the order, including the exit target prices. We aim to help you save time while increasing your trading success.
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- Candlestick charts are one of the most popular graphical representations of forex prices, and are easy to interpret.
- Technical Analysis can be complex using candlesticks with hundreds of indicators and patterns available.
- Changes in chart patterns can reveal an upcoming change in the trend. Be careful because it can sometimes jump over your stop-price order, such as during a sudden market gap after specific chart patterns.
No one can follow all forex pairs at the same time, only with a good AI-powered trading tool you can avoid missing good opportunities.
Candlestick Patterns You Should Know: Did you learn from our post? See more at Wiseinvest.ai/education.
Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.
The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. The forex broker Fxcm warns that 69.66% of retail forex traders lose money trading CFDs.
The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.