Most charting software supports bar, candlestick, and line charts. Normally,
you can customize the display and colors according to your wish.
You can use any reliable online charting service you want. Just make
sure they provide the basic analytical tools (e.g. the capability to draw
trend lines, and the option to add moving averages). There are so many
charting services out there that it would be hard to mention any one in
particular.
Let’s just put it this way: charts are not the crystal ball of trading.
Charts do not foretell future market behaviors or predict market prices.
They offer you a concise and accurate history of the price movements of
a particular market. In that history lays a trend, and it is from this trend
that you can extrapolate data on which to base your future projections of
probable market behaviors and price changes. That’s the greatest value
that you’ll get when it comes to using charts
Technical Indicators
Let’s keep it simple: money is made if you buy when the market is going
up and sell when the market is going down. That’s why technical analysts
hold to the motto "the trend is your friend.”Finding the prevailing trend will help
you become aware of the overall market direction and offer you better visibility
especially when short term movements tend to clutter the picture.
Trends
The price chart of a security may appear like a random distribution, but
this is not so.About 30% of the time, a security will be in a definite trend. The rest of
the time, prices will trade more or less in a sideways range. Our job is to
recognize trends early, as they emerge from non-trends, or as reversals of
prior trends.
Our goal is to buy or sell our security early in these new trends, exiting
the trade profitably when the trend ends. This identification of trend,
both its beginning and end, is the most important task we have as traders.
A simple definition of trend is basically the general direction of price
movements. An uptrend is present when prices make a series of higher
highs and higher lows. A downtrend is present when prices make a series
of lower highs and lower lows.
When prices move without such a discernible series, prices are said to be
trading sideways in a range, or trading trend-less. Once a trend is discernible,
then trendlines can be drawn to define the lower limits of an
uptrend or the upper limits of a downtrend.
It is essential that trend lines be drawn correctly. It is the recognition of
the trend line and the violation of this trend line that is your key to successful
trading and fortune building.
In an uptrend, trend lines are drawn below the prices, while in a
downtrend, trend lines are drawn above the prices.
In order to draw a line, we need two points. The first point is the low of
the day and the second point is the first retracement, when prices are no
longer making higher lows.
As a rule, trend lines can only become flatter, not steeper. Adjusting
the trend line to the second lower low would make a steeper trend line;
therefore, no change is made.
How to Read Candlestick Charts
Candlestick charts consist of a wide vertical line, and a narrow vertical
line. Each candlestick includes the open, high, low, and close of the timeframe,
the direction (upward or downward) of the timeframe, and the
range of the timeframe.
During live trading, you can read the candlestick chart like this:
1.) Open – The open is the first price traded during the candlestick,
and is indicated by either the top or bottom of the wide vertical
line (the bottom for an upward candlestick, and the top for a
downward candlestick).
2.) High – The high is the highest price traded during the candlestick,
and is indicated by the top of the thin vertical bar (the wick
of the candlestick).
3.) Low – The low is the lowest price traded during the candlestick,
and is indicated by the bottom of the thin vertical bar (the upside
down wick of the candlestick).
4.) Close – The close is the last price traded during the candlestick,
and is indicated by either the top or bottom of the wide vertical
line (the top for an upward candlestick, and the bottom for a
downward candlestick).
5.) Direction – The direction of the candlestick is indicated by the
color of the candlestick (specifically the wide vertical line). Usually,
if the candlestick is green, the candlestick is an upward
candlestick, and if the candlestick is red, the candlestick is a
downward candlestick, but these colors can be customized. In
the following chart, the upward candlesticks are colored black,
and the downward candlesticks are colored white.
6.) Range – The range of the candlestick is indicated by the locations
of the top and bottom of the thin vertical lines (the wicks).
The range is calculated by subtracting the low from the high
(range = high - low).
The candlestick chart body graphically illustrates the relationship behind
the open, high, low, and close, and this adds an extra visual edge, due to
the way they’re drawn.
The candlestick has a wide part, called the "real body." This real body
represents the range between the open and close of that day's trading.
If the real body is filled with red, it means the close was lower than the
open. If the real body is green, it means the opposite – the close was
higher than the open.
Above and below the real body we see the "shadows." We see these as
the wicks of the candle (which give them their name). The shadows actually
show the high and the low of the day's trading.
If the upper shadow on the green filled-in body is short, it indicates that
the open that day was closer to the high of the day. On the other hand, a
short upper shadow on a red or unfilled body shows the close was near
the high.
Regardless, of whether you’re a day trader, a position trader, a system
trader, or a trader who likes to make your own trades, there’s really
nothing to dislike about candlestick charts.
They’re easy, and they’re fun to use. Plus, they provide greater insight
into market moves, along with the versatility to be used in any type of
trading. If you aren’t already using candlestick charting, then it’s time
to start
To know more candle patterns with diagram please visit the following link.
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