Apiary Fund Blog

How to Analyze Candlesticks

[fa icon="calendar"] Jul 15, 2019 6:03:00 AM / by Lukas MacMacKen

Candlesticks are the most commonly used method for trading in the FOREX markets. They show the most vital four analytical points when trading. The only thing they are missing is the volume of trades being pushed through. Although, there are Volume Candlesticks that do present that information for you. However, with the FOREX market’s lack of centralization, an accurate measurement on volume is near impossible. So, with FOREX, candlesticks show the vitals: High, Low, Open, and Close.

Support and resistance trading is one of the most reliable and used methods for trading. One of the major benefits to candlesticks that cannot be seen with line charts or some other chart reading methods is that the support and resistance can be based on the highs and lows of the charts, not just opens and closes. This is a primary reason Shawn Lucas prefers candlesticks is it offers much more positions for these formations to occur than other price indicators.

Due to the time sensitive nature of candlesticks, unlike Kagi, Renkos, or PointN’Figure, support and resistance can form in the middle of the next candle. With any time concerning indication of price, the move may complete mid candle then reverse. This is why seeing the highs and lows is so vital in trading if you aren’t using movement based price action tools. When you take out the time, some things become more apparent, but without the highs and the lows that the candles offer, even some of the trend based representations can become obsolete.

Other important aspects of the candlesticks include their ability to form certain patterns. Some of the most leading indications of reversals in the market come from certain candle formations. The most notable of these is a shooting star or hammers. These are both forms of candles with smaller bodies and long tails that show an influx in the trade direction and allow traders to get in before a certain trend develops. More on these price patterns can be seen in the Reversal Trading for Beginners article.

There are many more different ways in which to analyze candlesticks. They can be in single, standalone, patterns or they can be in patterns that span the duration of the chart. Flags, pennants, and wedges are just the tip of the iceberg when it comes to patterns. “Trader on the Street” has a class dedicated just to different chart patterns you can see candles forming as you’re looking at charts.

These types of candle patterns are one of the reasons that Shawn Lucas excels and enjoys scalping so much. Candle reading is a cornerstone to trading and should be able to be recognized and use in their day to day trading. All indicators calculate based off of movements that occur in the candlesticks. Being able to see patterns emerge and recognize them gets traders ahead on their trading and up on their profits.

Topics: trading forex, shawn lucas, trading tips, analysis, candlesticks

Lukas MacMacKen

Written by Lukas MacMacKen

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