Candlestick Charts in Forex Trading

Candlestick charts are based on a charting method which originated in Japan over 300 years ago. In fact they used to be known as "Japanese Candlesticks" but now they are usually just called "Candlesticks" or "Candlestick charts."

A candlestick chart displays the same four pieces of information as the bar chart (see yesterday's post) - High, Low, Open and Close. The high is shown by a vertical line going up from the body of the "candle" - called the "wick", and the low is shown by a vertical line going down from the "candle", called the "tail".

Market activity between opening and closing is shown by the body of the candle. In some types of candlestick chart, a candle body left transparent or hollow means that the close was higher than the open, while if the body is filled in, it shows that the close was lower. In others, blue means the close was higher while red means the close was lower. The length of the body of the candle shows the range between opening and closing, while the length of the whole candle, including the wick and the tail, shows the whole range of trading prices over that time unit.

Many people involved in Forex trading find the candlestick chart more appealing and helpful than the bar chart. You can see at a glance what the markets are doing and this helps you make your decisions. A hollow or blue candle showing the close higher than the open indicates buying pressure, while a filled-in or red candle, showing the close lower than the open, indicates selling pressure.

Of course as we said yesterday there is much more to learn about charts, and Easy-Forex will teach you all you need to know when you trade with them. To learn more about Forex in general go to http://www.bizwrite.co.uk/Forex/forexindex.html