If you’re new to binary options trading, one of the most important charts for you to learn how to read is the candlestick chart. Candlestick charts (a series of candlesticks drawn onto a chart) are used by profitable traders in an effort to identify and capitalize off of trends. Here’s how candlesticks work….

The Four Parts To A Candlestick

Every candlestick has four pieces which make up the DNA of the trend outlined by the candlestick itself. Those four parts include…

  • High Wick – The wick at the top of the candlestick represents the high for the time which the candlestick represents.
  • Low Wick – The wick at the bottom of the candlestick represents the low for the time which the candlestick represents.
  • Candlestick Body (Top) – On bearish candlesticks, the top of the candlestick body represents the open price for the time period. On bullish candlesticks, the top of the candlestick body represents the close price for the time period.
  • Candlestick Body (Bottom) – On bearish candlesticks, the bottom of the candlestick body represents the closing price for the time period represented. Adversely, on bullish candlesticks, the bottom of the candlestick body represents the open price for the time period.

Candlesticks

Understanding The Colors

If you look at any candlestick chart, you’ll see a series of red and green candlesticks. The color of the candlestick represents the direction in which the trend moved for that period. For instance, if the value of the asset is rising, the candlestick will be green; indicating a bullish trend. On the other hand, if the value of the asset is falling, the color of the candlestick will be red; representing a bearish trend in the asset.

Candlesticks Tell You Who Is Leading The Race

To simplify things, trading in the market is considered by many experts to be a battle between the bulls (those who believe the market value will rise) and the bears, (those who believe the market value will fall). The color represented in the candlestick simply tells you whether the bulls or the bears are winning the race.