Candlestick chart is a popular forex chart pattern commonly used in forex trading. In a candlestick chart, forex traders will see colored candlesticks. What’s a Forex candlestick? In order to put this in an easy way, let’s see a picture:
Form the picture we can see that forex candlestick is formed with the high, the low, the open, and the close. The hollow or filled section of the candlestick is called the body. If the body is white or green, it represents the close is above the open; if the body is black or red, it means the close is below the open. The top of the upper shadow is the “high” and the bottom of the lower shadow is the “low”.
Features of the Bodies
A forex candlestick may have a long or short body. Long bodies indicate strong buying or selling. The longer the body is, the more intense the buying or selling pressure.
For white or green forex candlestick, the long body show strong buying pressure. The longer the body is, the further the close is above the open, which indicates a bullish market.
And for black or red forex candlestick, the longer the body is, the further the close is below the open, which indicates a bearish market.
Features of the Shadows
The upper shadow represents the range of the high price, the lower shadow the range of the low price. Therefore, upper and lower shadows provide important clues about the price range of the day.
Candlesticks with long shadows show that there is a wide price range within the day. Candlesticks with short shadows show that the price moves near the open and the close.
If a forex candlestick has a long upper shadow and short lower shadow, it means that the demand increases the price, but for one reason or another, sellers involve in and drive prices back down.
If a forex candlestick has a long lower shadow and short upper shadow, this means there is a selling pressure that forces price lower, but for one reason or another, buyers involve in and drive prices back up.