Mastering and Understanding Candlesticks Patterns
An overview of Candlesticks
A candle represents the changes in price over an interval of time, such as 1 day or 1 minute. The main body of the candle illustrates the opening price at the start of the time interval and the price when the market closed at the end of the interval. The length of the shadows shows how much the price has moved up and down with respect to a candlestick within a specific duration.
The candlestick body describes the difference between the opening and closing prices for the corresponding time period.
THe market is a battleftield between buyers and sellers. If one side is stronger than the other, the financial markets will see the following trends emerging:
If there are more buyers than sellers, or more buying interest than selling interest, the buyers do not have anyone they can buy from. The prices then increase until the price becomes so high that the sellers once again find it attractive to get involved. At the same time, the price is eventually too high for the buyers to keep buying.
However, if there are more sellers than buyers, prices will fall until a balance is restored and more buyers enter the market.
The greater the imbalance between these two market players, the faster the movement of the market in one direction. However, if there is only a slight overhang, prices tend to change more slowly.
When the buying and selling interests are in equilibrium, there is no reason for the price to change. Both parties are satisfied with the current price and there is a market balance.
Analysis aims at comparing the strength ratio of the two sides to evaluate which market players are stronger and in which direction the price is, therefore, more likely to move.
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