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dzonefx
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Number of messages : 574
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Date of Entry : 2013-01-29
Year : 47
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Understanding the Language of the Market

on Thu Jul 07, 2016 7:03 pm
Bulls, Bears, buyers, sellers…is anyone else confused? Don’t get your trendlines in a bunch; it’s easier than you think. Now that you know what a candlestick is, we can talk about how they essentially determine how you attack the market. At first glance, you’ll notice two types of candlesticks:


Hollow (Light) candlesticks - close price is greater than the open price, indicating buying pressure

Filled (Dark) candlesticks - close price is less than open price, indicating selling pressure

Clear as black and white, wouldn’t you agree? Now that you have this part down pat, you’re ready to learn about the Bulls and the Bears.

The relationship between the open and close is considered vital information and forms the essence of candlesticks. Hollow candlesticks, where the close is greater than the open, indicate buying pressure. Filled candlesticks, where the close is less than the open, indicate selling pressure.

TYPES OF CANDLESTICKS

BEARISH


Long filled candlesticks indicate that the Bears controlled trading for most of the time.

Bearish candlesticks indicate the market is moving in a downward trend. Need an easy way to remember this? Think of a bear trying to swat down a bee hive for some honey; only you’re a trader and you’re trying to swat some pips into your P/L statement to help you see returns sweeter than honey!

Now, what makes a candlestick bearish? You guessed it: filled or dark-colored candlesticks. Once you spot one, make sure it follows the same body-to-wick ratio that we talked about for bullish candlesticks.

The body rule still holds true for bearish candlesticks except this time, we’re in a downward price movement. Guess what they say is true: the bigger they are the harder they fall.

BULLISH

Long hollow candlesticks indicate that the Bulls controlled trading for most of the time.

Bullish candlesticks indicate the market is moving in an upward trend. An easy way to remember this is by picturing an actual bull: bulls’ horns go up just like the market will when you spot this type of candlestick.

So, what exactly are you looking for? Keep an eye out for those hollow or light-colored candlesticks we were talking about earlier. Once you have your bullish candle, take a look at the body. The bigger the body, the bigger the upward price movement for that specific point in time. Ideally, you want to identify a full-bodied candlestick with small wicks.

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