In the world of forex trading, there are ways that you can use to analyze market conditions. You can use one of the charts to read forex market conditions and information. Candlestick itself is one of the most frequently used forex charts by many traders and investors.

This is because candlestick itself is considered the most straightforward and easy-to-read chart. In addition, its shape is easier to understand anatomically. But that doesn't mean you can analyze it in 1 minute. Here is a further review of this chart and how to read candlesticks in forex.

What is Candlestick

Candlestick itself is a graph that contains forex market information that is considered the most complete with relatively simple and easy-to-read visualization. However, in reality there are still many people, including traders and investors who cannot read candlestick charts accurately in a short time. It turns out that experience and insight into forex itself are needed.

The most accurate way to read candlesticks is to make sure you understand the anatomy of the chart properly, including the time span and size of the candlestick chart. That way, the reading process will be easier and you will understand the meaning and important information contained in the chart more quickly.

Candlestick Functions in Forex

As mentioned, the main function of candlestick is to see the direction of movement, namely from the trading market itself. The movement of the trading market whose data is contained in this candlestick chart must be read correctly in order to make the right and accurate analysis. So, traders and investors do not take steps that may harm them during the trading process.

So how vital is this candlestick chart in forex trading activities? The answer is very vital, because seeing the reality where almost all professional traders choose to use candlesticks in guiding important decisions by looking at the movement of the forex market before opening a position and determining an effective strategy later.

How to Read Candlesticks

For those of you who are still beginners, especially in the world of forex trading, the right and accurate way to read candlesticks will certainly be needed. To help you understand and train your ability to read candlesticks, here are some ways that you should practice and try every day to become more fluent when reading candlesticks.

  • Understanding Candlestick Anatomy

Candlestick charts can show the price development of an asset at the same time as the formation of a candle-like formation on the chart visualization in a certain time span. Each box on the chart shows the price movement in one period, there is a special marker that shows the price at the beginning of the period (opening) and the highest price in the period (high), the lowest price (low), and also the end price of the period (closing).

  • Opening Price

Located right at the top or bottom of the candlestick body. When the price increases in one period, the opening position will be below the green candle body. While when the price drops, the opening will be above the red candle body.

  • Highest Price 

The position is right at the top of the candlestick's top wick. When the closing price or opening price is also the highest price, the candle will not have a wick, only the candle body.

  • Lowest Price

The position is right at the top of the wick or the lowest candle tail. However, when the closing or opening price is the lowest price, then this candle will not have a wick at the bottom or at the tail.

  • Closing Price

The position is right at the top or bottom of the candle body. When the price increases in one period, the closing will be above the green candle body. While when the price decreases, what happens is the closing is below the red candle body.

The price marker on this candlestick chart will continue to change as long as the chart is still in the formation phases. Once a candlestick is formed, the latest candlestick chart will immediately be drawn again next to it. This continues as long as trading hours are active. So, don't be surprised if the color or size of the last candle on this chart (far right) will always look different.

Pay Attention to Time Span

Another important thing that you need to understand in order to be able to read candlesticks accurately is to ensure that the candlestick chart is on the same time frame. One candlestick on this daily time frame represents the opening price, highest price, lowest price, and closing price in one day.

Then, one candlestick for a five-minute time frame will represent the opening price, highest price, lowest price, and closing price in just five minutes. Likewise, the application of the time span concept to candlestick charts with hourly time frames and so on. That is why reading candlesticks and ensuring the time span is very important in order to get more accurate reading results.

Also make sure you wait until the candlestick has finished forming in a certain period of time before analyzing it in forex. Analyzing a candlestick that is still in the process of forming is a fatal mistake because the information from the candlestick is still changing. The potential for errors in reading the graph is clearly high and can result in analytical errors that are detrimental to you when trading forex.

Understand Candlestick Size and Spacing

You also need to know that the size of each candlestick is influenced by price fluctuations in a period of time. If what happens is that the price fluctuation increases high, then the size of the candle will be bigger. This is an indication of the strength or weakness of the selling and buying currents of a currency pair.

The benchmark that you can use here is the body of the large and green candlestick, which indicates a high buying current or a very strong buyer movement. Meanwhile, the large but red candlestick body indicates a high selling current where the movement of sellers is also strengthening.

Another benchmark is the condition of the upper or lower wick which is very long from a candlestick with a small body. This indicates a possible reversal in the direction of price movement. However, if what happens to the candlestick is that the upper and lower wicks are the same length with a small candle body, then this indicates a market that is in an unclear situation in determining the direction of price movement of foreign currencies. You should pay attention to the reversal of this candlestick.

When the distance between candlesticks is too far, where the ends of the wicks or candle bodies do not touch each other and create distance, this indicates a price movement that is too high or indicates a condition where the market is experiencing minimal liquidity. This distance is very normal at the beginning of the week. However, if the distance occurs at another time, it could be that something happened that affected the price movement in the market at that time.

You can try some platforms that provide forex trading simulations, there are several platforms or applications that usually provide candlesticks. From here, you can learn forex trading and try to practice how to read candlesticks more accurately. You can also start with the shortest time frame, before trying how to read candlestick charts on a longer time frame. Hopefully this information can be useful for you.

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