Today I want to spend a few minutes talking about candlestick charts and how it relates to the price action of Gold or Silver or any other thing we are trading. Whenever we trade we will need to have something to identify the direction that the price is moving.
There are bar charts, line charts and candlestick charts to name a few. Each of these can give us an idea of the trend and momentum that is happening on the charts.
The candlestick chart is one of the most commonly used charts as it give us a good visual as to what is happening with price. Take a look at the illustration below that show the meanings of each candlestick. The red candlestick tells us that the price opened high and dropped to close lower and the green candlestick tells us that the price opened lower and rose to close higher. We can also see the thin vertical lines that extend above and below the body of the candlestick which show us the high and the low of the price action during the candlestick.
Each candlestick can represent anything from 1 minute to 1 month so you will get a different perspective on the price action with the various time frames. Knowing the time period you are dealing with can help you know how strong a move is and how much momentum is behind the the move. For example, if the candlestick is long, but only on a 1 min. In addition, we can look at the size of the candlestick to understand when this momentum is beginning to slow down.
Take a look at the 4 candlesticks below and you can learn a lot about the price action that is occurring with them. Candlestick A tells us that there is equilibrium between buyers and seller. Neither one of them can push the price up or down. Candlestick B tells us that the price movement is strong in the bullish direction. This means that he buyers are in control.
If the candlestick was big and red it would indicate that the sellers are in control. Candlestick C indicates that the price did not move but that it had dropped during the time period only to move all the way back up to where it started. Again a sign that the bulls are keeping control.
The reverse is true for candlestick D where the price tried to move up but the sellers came in to push it back down. As one looks at the chart for Gold or Silver you can start to look for the types of candlesticks that are showing up to give you an idea of what might be going on. It can help you know if the momentum is strong or weak and if there may be some reversal in the price action getting ready to start.
Take some time to look at these so you can better understand this momentum. Skip to content Today I want to spend a few minutes talking about candlestick charts and how it relates to the price action of Gold or Silver or any other thing we are trading.More...