Technical Analysis by Candlesticks

What are Candlesticks?

• In technical analysis, a Candlestick pattern is a movement in prices shown graphically on a candlestick chart that some believe can predict a particular market movement. 

• When data is fed from exchange and integrated into various charting software's like Amibroker, Metastock, Metatrader etc, candlesticks are generated which depicts movement of price and thus shows a pattern of any stock performance. Candlesticks are very effective for Technical Analysis as they help in forecasting future price movement as to in which direction it will move, either upwards, downwards or sideways. 

• Candlesticks are graphical representations of price movements for a given period of time. They are commonly formed by the opening, high, low, and closing prices of a financial instrument.

Candle Stick Parts

Candlesticks contain the same data as a normal bar chart but highlight the relationship between opening and closing prices. The narrow stick represents the range of prices traded during the period (high to low) while the broad mid-section represents the opening and closing prices for the period.

• When the closing price of the candlestick is greater than the opening price, then the candle is a Bullish candlestick and is represented by a white or green candlestick real body. Conversely, if the closing price is less than the opening price, then the candlestick is a Bearish candlestick and is represented by a black or red candlestick real body. 

The advantage of candlestick charts is the ability to highlight trend weakness and reversal signals that may not be apparent on a normal bar chart.

Conclusion

Candlestick patterns have become the single most accurate means of identifying the ever obscure current state of price action .  By virtue of open, close, high, low and those relative to the previous bar candlestick charts are the best way for a trader to identify excellent trade opportunities. 

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