Let’s learn the basic way to read candlesticks! ~How to read charts Part 1~ Technical Analysis Basics Course #3
Hello! I'm SAKU!
Previous article discussed the price movement mechanism from supply and demand,
Starting this time, over two installments, we will finally talk about the basic way to read charts!
Since this is the first step of technical analysis, let's study it properly!
This time we start with the basics—the way to read candlesticks!
What is a chart?
In technical analysis,a chart visualizing the movement of currency pair pricesis used for analysis.
A chart is like a map without a destination, like a nautical chart. In the first place, a chart is a sea map.
Commonly used for representing price movements are candlestick charts, bar charts, line charts, etc., but in this blogcandlestickswill be the main focus.
To analyze by looking at charts, you need not only a basic understanding of candlesticks but also the ability to perceive the price movements drawn by candlesticks on the chart as a waveas a sequence of movements.
The actual chart screen looks like this. ↓ (MT5 chart software is used)
How to read candlesticks
Candlesticks, whether a single one or a group of several, convey various information.
Candlesticks originated in Japan, and their origins are said to go back to the Edo period.
What was recorded to predict the U.S. market was the price movement, and in the Meiji era it is said that the current form of candlesticks was devised.
By the way, in the West, bar charts are mainstream (recently more people are using candlesticks, which are often called Candle Stick—just a direct translation of candlestick).
・Four price values
The four values of open, low, high, and close are collectively called the four price values.
Open・・・the price where movement began during that period.
Low・・・the lowest price reached during that period.
High・・・the highest price reached during that period.
Close・・・the price where movement ended during that period.
Also, the protruding parts above or below the candlestick are called the “wicks”, and the body is called the “real body”.
・Bullish and bearish candles
Candlesticks can be broadly divided intobullish andbearish.
・Bullish・・・a candlestick whose close is higher than the open
・Bearish・・・a candlestick whose close is lower than the open
In most charts, candlesticks range from 1-minute to monthly, visualizing price movements within each period.
In the bullish case, the close ends higher than the open
→ buying pressure is strong
In the bearish case, the close ends lower than the open
→ selling pressure is strong
This is the basic interpretation.
・Inside candlestick price movement
Candlesticks, even a single one, convey various information, and within that single candle the price movements within the period are contained.
Open, then the low and high, and finally the close.
The candlestick visualizes as one unit the various movements that occur during the period it forms (the figure below shows an example of price movement inside a candlestick).
This imagining the inside movements of the candlestickis extremely important for advancing in technical analysis, so start building that habit now!
By the way, popular charting software includes MT4 (MetaTrader 4), MT5, TradingView, and platforms provided by various brokers.
Which is better depends on the person, so use whatever suits you!
Next time「Price Wave」we will discuss!
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