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What Does Candlestick Analysis Mean in Trading?
A candlestick chart comes in the form of rectangles with lines, which is very similar to candles visually. This method of displaying the direction of asset prices in Forex is much more informative than a standard line chart.
The xSupertrend candles indicator is represented as red and green candles on the price chart. It timely predicts the direction of the trend and the moment when the price will reverse in the opposite direction.
Experienced traders suggest using the strategy on the D1 timeframe to have more reliable signals. Enter a bullish trade when the candles turn green. When the candles turn red, enter a bearish trade.
When trading based on the 3 candle rule, watch the last three candles. The last candle looks larger than the two previous ones.
- The pre-last candle should be directed downward after a strong rise of the trend (that is, to be bearish).
- The price at the close of the last candlestick must be higher than the price of the previous one (bullish candle).
- The pre-last candlestick goes up after a strong downward trend (that is, to be bullish).
- The last candle closes at a price lower than the previous one (bear candle).
Your trade can be profitable thanks to the spike candle model.
The pattern can form at the end of a bullish or bearish trend, following powerful upward or downward impulses. The spike candlestick strategy is applied when the market volatility is high, thus being under time pressure. Decisions need to be made instantly; so, a novice trader needs to gain some experience in pattern recognition.
The human factor influences the “spike” uprise. Traders open massive trades after the impulse is generated, and they start to close orders after the candles decline. In addition, a spike is formed when a trader enters the market with a very large position volume. The main factor is still the influence of economic news or force majeure.