Tuesday, May 3, 2016

What is a Candlestick Chart in Forex

In the forex market, a candlestick chart is a type of financial chart used to display the movement in the prices of a currency. Each candlestick is equivalent to one day, so a one-month candlestick chart may contain 20 candlesticks to represent 20 trading days.

The candlestick chart is considered as the most favorite tool used by many traders, and it is because of a valid reason. Candlestick charts are known to provide more information compared to other price charts. The candlestick is a thin vertical line displaying the period’s trading range. The wide bar in the middle of the vertical line, or what is considered as the candle’s “body”.

The candlestick chart is basically a combination of a line chart and a bar chart. The candlestick line contains the value of the currency at open, high, low and close of a certain day. The candlestick has a wide bar, which is considered as the body. The candle’s body shows the range between the open and the close of the trade that day. 

When the candle’s body is filled with black, or red, it indicates that the close was lower than the open. However, if the body appears as colorless, transparent or filled with green, then it means that the close was higher than the open. 

Just above and below the candle’s body are the “shadows”. Traders considers these as the wicks of the candle, and it is the shadows that represent the high and low prices of that day’s trading. When the upper shadow on a down day is short, it indicates that the close was near the high. The relationship between the day’s open, high, low and close determines the appearance of the daily candlestick.

Learn more about the forex market and further understand what is forex by reading our educational forex blogs. See who the best forex brokers are, visit Wibestbroker.com to find out!

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