Candlestick charts create a perfect mix between a line chart and a bar graph, providing more information about the price variations than any other chart type. Overall these candlestick charts enable you to have a more precise description of the price discovery of the specific asset you study. The analysis of these candlesticks can help you identify trading opportunities and determine whether bulls (the buyers) or bears (the sellers) dominate the market. The analysis of candlestick is a precious instrument in a binary option trader’s toolbox to help him predict future price movements.
What are Candlestick Charts and How to read them?
Candlestick charts get their name from the thin bars that they are composed. These bars display the opening and closing stock price as well as its high/low range which resemble the wick of a candle.
Candles are arranged along a chart, in a pattern similar to a simple line graph, however they contain more information than a simple line graph can give. Every candlestick represents the price variation over a selected period. For binary options trading, investors often use short-term periods ranging from 30 minutes to one hour.
The Bars – Each candle is formed by a filled in rectangle that indicates whether the stock was up or down over the selected candle period. A longer body represents either increased buying or selling pressure due to the behaviour of investors during the time period. Most candlestick bars are red and green. Red bars mean the assets price closed lower than it opened for that time period. Green bars mean the asset closed higher than it opened for that period. The size of the bar represents the price movement of the asset from open to close. The top of a red candle represents the opening price of the asset and the bottom of a red candlestick represents the closing price of the asset over the determined period.
The shadows –On the top and bottom of each candle is a line. This line shows the highest and lowest points reached by the asset during the selected time period. Long shadows tend to show a shift in sentiment among investor. Either buyers drove prices up then later, trading slowed as investors refused to pay the high prices, or vice versa. Long shadow candlesticks often indicate trend reversal and serve as trading signal for day traders.
How to use Candlestick Charts to Trade Binary Options?
The analysis of candlestick charts is what is more often referred to as technical analysis. Over the years, active investors that follow their charts all day long have begun to notice that recurring market trends are typically a reliable predictor of events to come. Technical analysts have started to identify patterns on candlestick charts. These patterns can help you identify trading opportunities and decide whether it is the time to buy or sell a specific asset at a specific time. If you want to learn theses patterns, we will present them all on an incoming article.
Which broker proposes candlestick charts?
Almost all binary option brokers propose candlestick bars but OptionRally and IG binary were really early in proposing them to clients so they were able to work out all the bugs since then. You can also use a free provider of candlestick charts such www.freestockcharts.com in parallel with a binary option broker but make sure it provides live data cause this is rarely the case. This is one of the many reasons binary option brokers are not able to provide free demo accounts, fraudulent clients could use it to gain access to live prices.
Do not hesitate to have a look at our detailed reviews of the best binary option brokers in Europe and use our links to access their websites and benefit from the full support of our team as well as additional privileges.