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Important Notice - Fraud awareness
Important Notice - Scam alert
62.96% of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Important Notice - Fraud awareness
Important Notice - Scam alert
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.96% of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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    How Forex traders use candlestick charts to analyze forex trends - Trading Strategies for Advanced Traders

    K-line combination also known as the candlestick chart is a type of technical analysis, which belongs to the basic content, is easy to learn and understand and is mainly used for short-term trading. It is characterized by frequent trading signals, small single-digit profits and losses, and more stable transactions. Of course, the stable transactions mentioned here may mean stable profits or stable losses. 

    Whether the candlesticks chart can be applied to the real trading market is not about how many historical tests the trader has conducted, or how high the winning rate is in history, or the profit and loss ratio, but whether the logic behind the candlesticks chart is aligned with the market and the fundamental laws of operation.

    Investors who want to do a good job in forex trading must understand the analysis of forex trends. The analysis of foreign exchange trends requires the use of a candlesticks chart as support and resistance. Candlesticks charts are the key to successful trading for many investors. So how can you use the candlesticks chart to effectively analyze the trends in the foreign exchange markets? 

    ATFX-candlestick-chart-trading

    First of all, we must master a basic understanding of the foreign exchange candlesticks chart form. The candlesticks chart is different every day in the foreign exchange market, but careful observation can reveal that some charts are the same. After observation and summary, the professional usually identifies several typical patterns, such as the main axis trend, cross-line trend, etc. These typical trend graphs have their own characteristics. Investors should learn and master these typical trend graphs. They should know the basics of the in-depth analysis of candlesticks graphs, master typical graph patterns, and be better at analyzing complex trend graphs. 

    The second step is to deeply analyze each line and the root cause that affects its trend. The candlesticks chart of foreign exchange trends is composed of different lines. Each line may affect the next trend. At the same time, investors must understand the characteristics of each line. Every trend has reasons, it is necessary to analyze the reasons behind them, such as why the sun line suddenly appeared, why it appeared, why the momentum is very slow, and important financial events or market news, and then develop your analysis. After a long time, traders will naturally learn to analyze the foreign exchange candlesticks chart in-depth.

    The third is to learn to use trading tools to analyze the candlestick charts. For example, traders who often make foreign exchange transactions know that there are many lines on the foreign exchange candlesticks chart. These lines have different meanings. At the same time, investors can also draw their own lines for trend analysis, which is clear at a glance. Finally, of course, there is also some professional analysis software, investors can consider based on their individual situation. 

    In addition, if investors analyze the candlesticks chart of foreign exchange trends at a deeper level and dig out the secrets behind it, they also need to learn to take a long-term perspective and not stick to the current trend. They should conduct a macro analysis and create a trading strategy plan. 

    ATFX-candlestick-chart-forex

    How to predict the rise and fall through candlesticks

    The candlesticks chart is the best technical analysis tool. Different investors will have different opinions when looking at the candlesticks chart, so there will be different ways of trading. Many different results were analyzed, but there are mainly two results: loss and profit.

    There is a little trick to working with the candlesticks chart: first look at the yin and yang, then look at the entity and finally look at the shadow line.

     

    1. Look at yin and yang 

    Yin and yang represent the trend direction, which is either long or short. The yang line indicates that the current market is in an upward trend and may continue to rise, and the yin line indicates that the market is in a downward trend and may continue to fall. Taking the yang line as an example, after a period of long and short trading, a close higher than the open indicates that the bulls have the upper hand, so the yang line indicates that the price will continue rising in the next stage.

     

    2. Look at the entity 

    The entity refers to the difference between the closing price and the opening price of the candlesticks chart. The larger the difference, the stronger the power of the candlesticks chart. Therefore, choose a candlesticks chart with a large physical part in the transaction, such as the big Yin Yang. The probability of successful trading will be higher when the big Yang line is used, which helps traders learn more about risk management in trading

     

    3. Look at the shadow line

    The shadow line refers to the highest low of the candlestick or the difference between the lowest price and the closing price. For example, the upper shadow line is the difference between the highest and closing prices. The smaller the gap between the highest point and the closing price, the longer the upper shadow line is, overshadowing the upward force. At such times, it is more advantageous to buy or sell short. The lower shadow line refers to the price difference between the lowest price of the candlestick and the closing price. The longer the lower shadow line implies that the downward force is blocked, and the upward counterattack is about to be powerful. Therefore, if you see that the upper shadow of the candlestick is too long in the transaction, don't go for a long position. Likewise, if you see that the lower shadow of the candle is too long, you cannot go short. 

    It is very obvious how to use the candlesticks chart to judge rising and falling prices. It can be said to be simple and easy, but there are also certain risks. There is no way to be 100% correct, so investors must have a clear direction. It is common knowledge that you must use a stop loss in trading, and pay attention to the upward trend of the international market. If the market changes greatly, you must make a timely change in your strategy.


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    Last Updated: 17/12/2021

    This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


     

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