Know These Possible Dangers and Constraints of Candlestick Charting Unfamiliar to Lots of Traders!

Candlestick charts is a visual illustration of the battle involving the bulls and the bears that will take position in the market place. It will take time for this battle to consider shape. Candlestick designs on the quite small timeframes made use of for scalping and some other day buying and selling approaches may possibly not give alerts that can be appropriately interpreted and traded.

In the very last 10 years electronic buying and selling has grow to be very well-known. What this indicates is that sizeable volume of the buying and selling will take position outside of the normal market place hrs. This buying and selling can bring about designs that you should not mirror the total photo to seem on a candlestick chart.

For case in point, stock ABC trades on NYSE. NYSE formally opens at 9:thirty AM EST for buying and selling. Stock ABC open up price tag is $60 per share. However, this stock had been buying and selling on the electronic community in the pre-market place hrs as very low as $59. Now the open up on the NYSE may possibly not be a accurate reflection of where the stock had been buying and selling in the beginning on that day.

What this indicates is that the open up recorded on the candlestick chart is not exact. Now, suppose the stock ABC never trades down to $59 all through the day. So, the very low on the candlestick chart may possibly not be an exact depiction of the day’s price tag motion.

So, electronic buying and selling will make these charts to some degree inaccurate. Few this with the point that on small timeframes, candlestick charts are not quite exact. These charts are great for timeframes of one hour and over. Just maintain these two limitations of candlestick charts.

Apart from that candlestick charting is a highly effective tool in the hands of an knowledgeable trader. When an knowledgeable trader brings together these charts with technical indicators, this mix can develop very exact buying and selling alerts.

Candlestick designs can be a great get and market signal when blended with a technical indicator like the RSI or the stochastic. There are very simple as effectively as complicated candlestick designs. Solitary stick candlestick designs are quick to location nevertheless, two stick and 3 stick candlestick designs do not seem quite usually but when they do, they are quite exact and can be very profitable to trade!

Now Yahoo Finance is an fantastic totally free useful resource that you can use to make candlestick charts for any stock by just getting into the stock ticker symbol. You should really engage in close to with the alternatives readily available for Yahoo Finance. This will enable you to master a lot of new matters about candlestick charting.


Currency Trading Strategies

This write-up forms a part of a comprehensive series on forex that aims to gradually broaden the vision of the reader. It would behoove the readers to refer to the following article that provides an introduction to Forex trading. The aforementioned article is a synoptic overview of forex trading without going into the specifics. Understanding the strategies of currency trading hereafter would not pose to be a challenge for comprehension.

Currency Trading Strategies

Fundamental or Technical Analysis

Fundamental and technical analysis are indispensable for making profitable forex trades. Although currency trading hinges on the ability of the trader to determine the price of the currency by evaluating factors that have a direct bearing on its value, this alone will not suffice. It’s imperative for the trader to be conversant with charts and graphs since actual price may be a reflection of market information being impounded into the price of the currency pair. Identifying patterns is also important since there is a high probability of patterns repeating on a consistent basis. In other words, one cannot ignore forex chart patterns and rely solely on fundamental analysis.

Technical Analysis: Understanding Chart Indicators

Charts form the basis for currency trading strategies. Candlestick charts give the opening, closing, highest, and lowest price with the help of a vertical bar positioned on a shaft. They depict the range of values for a currency pair for a given time period. One needs to be able to interpret charts to decide on the appropriate strategy, viz. buying or selling.

If the candlestick chart is colored it means that the closing price is below the opening market price. If the opening price is less than the closing price, the candlestick is hollow (not colored). The colored/hollow portion of the forex candlestick is called the body of the chart while the lines above and below the body are known as shadows.

A candlestick with a long body indicates strong activity while one with a short body indicates less activity. The upper and the lower shadows signify that forex trading pushed prices well beyond the opening and the closing price. A long upper shadow means that buying activity pushed the prices up, but selling outweighed buying and resulted in the price settling at a level pretty much near its opening price.

If the upper and the lower shadows are long, it indicates a market wherein buyers and sellers are uncertain. If the opening and the closing price are the same, the body of the candlestick becomes extremely short and the candlestick starts looking like a cross, an inverted cross, or a plus. This pattern is known as a doji. A doji signifies a change or a reversal, especially if it occurs after a series of candlesticks with colored or hollow bodies, since it indicates the resumption of buying or selling activity respectively. Hammer (hanging man) indicates that the prices are beginning to bottom out (or have peaked).

When prices start increasing, the lowest point that is reached by the market before it moves up, is known as support level. When prices start falling, the highest price that is attained before the market pulls back, is known as the resistance level. A support is like the bottom of the valley while resistance is like the peak of the mountain. A line that joins the bottom of the valleys is known as the uptrend line while one that joins the peaks is known as the downtrend line. A pair of downtrend and uptrend lines create a channel that is basically a technical range between support and resistance levels.

Moving averages are used to smoothen out fluctuations in price or volume. They may be simple or exponential, and are used to measure momentum and identify support and resistance. A downward momentum is identified when the short-term moving average crosses below a long-term average, and vice-versa for an upward trend.

Using Forex Trading Robots

It’s evident from the above discussion that technical analysis is not easy. In fact, forex training is far from over since one needs to understand measures of volatility, Fibonacci extension and retraction levels, oscillators and momentum indicators. Moreover, one should know how to calculate pivot points and be proficient with a number of chart patterns before commencing trading.

Considering that manual trading is not everybody’s cup of tea, a number of people have started relying heavily on automated trading robots. Hopefully, the above article would have provided pointers on choosing appropriate currency trading strategies. Since a forex trader is highly leveraged, making a small mistake in interpreting the direction of the market can have disastrous consequences.