Article: Currencies are always traded in pairs on Forex. When you choose a currency pair, for example, EUR/USD, the chart you generate will show you how many US dollars you can buy for one Euro. You can test the relative strength of a particular currency by looking at several different pairings. The various pairs available depend on the Forex service you're using. You can pull up charts for major pairs, such as EUR/USD. You also often have the option of looking at minor pairs as well, such as AUD/CAD (the relationship between the Australian Dollar and the Canadian Dollar). Your chart shows how the exchange rate between the two currencies changed over time. In a candlestick chart, each candlestick accounts for a specific time period you set. You also set the overall time period, which determines how many candlesticks you have. For example, you could set your overall chart to show a 24-hour period, with each candlestick representing one hour. Each candlestick shows the opening price at the beginning of the hour and the closing price at the end of the hour, as well as the high and low price during that period. Since you chose a 24-hour period, you would have 24 candlesticks total. The position of the candlesticks on the graph shows the fluctuations in the exchange rate between the two currencies over the period of time you've chosen. The time period is expressed in intervals along the Y-axis and the exchange rate is charted along the X-axis. Generally, there are two types of candles: a bullish candle and a bearish candle. On most candlestick charts, the bullish candle is open while the bearish candle is colored in. The differences are as follows: If the closing price is higher than the opening price, you have a bullish candle. If the opening price is higher than the closing price, you have a bearish candle. The top and bottom lines of the candle itself display the opening and closing exchange rate for the pairing you've chosen. You know which one is the opening and which is the closing by looking at the coloration of the candle body. Then you'll see lines extending from the top and bottom of the candle, giving rise to the name of the chart. The highest point, at the tip of the wick, is the highest exchange rate for the pairing for the selected period. The lowest point, at the tip of the shadow, is the lowest exchange rate for the pairing for the selected period. On a bullish candle, the highest line of the candle will be the closing price, while the lowest line of the candle will be the opening price. For a bearish candle, the highest line would be the opening price and the lowest line would be the closing. Part of what makes candlestick charts fun to read are the names given to different patterns. Once you learn to identify these patterns, you can more accurately predict which way the market is going to move for the pairing you're evaluating. Some patterns with predictive value are: Big candles: A big candle body indicates a trend that is continuing for a longer period of time. If you see a large bullish candle, you know the bullish trend is continuing for that pairing. A large bearish candle indicates a continuing bearish trend. A bullish candle might signal you to buy that pairing, while a bearish candle would signal you to sell. Doji candles: Doji candles have little to no candle body. These indicate the market condition is neutral or tentative. Doji candles can tell you to hold off on either buying or selling that currency pairing. Once you know how to identify types of candlesticks, look at their relative position on the chart. This helps you understand what that particular pattern is actually telling you about the way the market is moving. For example, suppose you see a Doji candle with the candle line at the bottom of the formation so that there's a longer wick and no shadow. If you see that candle at the top of an uptrend, it may signal that the uptrend is reversing.
What is a summary of what this article is about?
Pick the currency pairing you want to evaluate. Determine the time period you want to be displayed. Distinguish bullish candles from bearish candles. Identify the parts of the candlestick. Learn the names of candlestick patterns with predictive value. Place the patterns in context on the chart.