THE CANDLESTICK CHART: HOW TO CANDLESTICKS CHARTS
Candlestick chart is a connection between buyer and seller, and
mere representation of their sentiment; a candlestick chart is just a
storyteller that tells you how the market sentiment trend through the day, announcing the day in either favor of buyer (
if green dominates) or in a favor of seller ( if red rules).
Now you have known the game, so let us learn how to watch it.
perquisites of learning to read candlestick chart
Perquisites are three main element of game you need to keep
eye on, while watching the game: ‘the
price’ , ‘the color’ and ‘the difference value ‘
The Price
Prices are value of the stock a point of
time, the price can be read through the observing wick and the ends of the
candle. There are four types of prices represented by a candlestick chart.
Opening price
Opening price is the first trade in first
five minutes of the day, or of stock at
point of time. It is indicated by top or
bottom end of the candle as shown in fig 1.1; it is at the lower end if candle
is green and on upper end if the candle is red.
High Price:
High price is the maximum price of a stock traded at a point of
time. The upper wick of both red and green candle indicates high price of the
stock, as displayed in fig 1.1.
The absence upper wick indicates high price is opening or
closing price of the stock.
Low Price:
Close price
Close price is the last price of a stock traded at point of time, or at the closing of the
day; it is indicted by upper end of red candle and lower end of green candle as
displayed in the fig 1.1.
If close price is less than opening price candle will change from green to red color.
Color
The color plays a major role, it gives
you the simplest indication i.e., who won the game? Buyer? Or sellers?
If the color green dominates the chart,
it is victory of seller but when color green dominates its victory of buyers;
the victory of former declares market bullish and victory of latter declares
market bearish.
Price difference
Price
difference is the range of price of a stock at the point of time, go to the fig 1.1 again, you need to look at high price
indicated by upper wick and low price indicated by lower wick; when you are
reading the chart you noted value there and calculate its difference, it will
give you the price difference of a stock at the pint of time, represented by
red or green candle.
how to make a decision
You have learned to how to read chart and
now you’ll learn to make a decision by interpreting a candlestick chart.
There are two types of decision we make using the chart:
BUYING DECESION
In order to make a buying decision you need to follow following steps:-
Stop a bearish chart
Spot the consolidation point
In order to first spot the consolidation,
point you need to note the price range of stock or size of a candle, and note
when same candle is repeated in the pattern.
Buy the stock
Once you have read the pattern over 2 or 3 months, we can consider it a stable stock, you can buy this stock, it will show an uptrend in future.
SELLING DECISION
In order to set the stock, you need to
perform following action:-
Notice an uptrend in consolidation
An uptrend in consolidation is a positive
signal, that many people will notice,
and will fetch you potential buyers.
Wait for fall back
Wait for fallback in consolidation, it is
the time when many potential buyers will be interested to buy the stock you
possess.
Sell the stock
Now it’s time you sell the stock to the stock to the buyer at your desired price.
Candlestick chart is just a storyteller that tells you how the market sentiment trend through the day, announcing the day in either favor of buyer ( if green dominates) or in a favor of seller ( if red rules). A bearish market open up oppurtunity for buying and bullish an oppurtunity to sell out shares.
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