The Candle

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The Candle

In the previous lesson, I briefly mentioned candlesticks, and that throughout this course we would be using the candle chart. We better get a handle on candles then.
Candles generally have 7 parts to it. Open, High, Low, Close, Body, Upper Wick and Lower Wick. Because this may seem like a lot to remember let’s look at a candle.

Candle formations are created using the open, high, low and close.
•    If close is greater than open, then a blue candle is created
•    If close is less than open, then a red candle is created
•    The area between the open and close is the body
•    Lines extending above and below the body are called wicks or shadows
•    The very top of the upper wick is the high
•    The very bottom of the lower wick is the low

When looking at a chart, many different candles are forming the story line of price action. These candles tell us where price was, and because we, as technical analysts, believe the past may help us know where price is likely to go, can form an opinion on future price direction. Later, I will introduce specific candles and candle formations that have, in the past, led to possible trades.

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*Risk Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Hypothetical versus Live Results: Always assume that results shown in articles on this blog are hypothetical results. If they are not hypothetical results, they will be clearly and un mistakenly identified as "live account" results. Otherwise all studies, script analysis, trading strategy analysis and other results are HYPOTHETICAL RESULTS and not traded on a live account.
** “Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particularly trading program.
One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk. Variables such as the ability to adhere to a particular trading program in spite of trading losses as well as maintaining adequate liquidity are material points which can adversely affect actual real trading results.”

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