3 Essential Candlestick Pattern Trading Tips You Should Adopt

0
683
Candlestick Pattern

Candlestick charts make it a lot easier to invest money for newbie investors. Compared to traditional charts, candlestick charts provide a detailed analysis of the market in all conditions. You can use candlestick charts to invest money the right way. Candlestick charts can also be used regardless of the investing strategy you use.

If you are new to investing in candlestick charts, you are at the right place. Here are three actionable tips that will help you make more profits in the long run – keep reading.

1. Study the Volume

When trading with candlestick charts, you have to ensure that you build a good understanding of the “market volume.” The volume of the market is defined by the number of shares/contractors that are bought and sold during a specific period of time.

The good thing about market volume is that it can be defined for short-term and long-term trades alike. The volume of the market can be divided into two categories:

  • High volume
  • Low volume

The high volume of the market describes that the market is going through a volatile phase. On the other hand, the low volume shows that the market is “thin,” and fewer people are active in the market. You need to study both the high and low volumes to identify your next trading strategies.

In most cases, low volume can be linked to inconsistent price action in the market. You need to be extra careful when using candlestick charts during a low-volume scenario. The spikes from low volume to high volume can also trigger irrational decisions by investors, and you should act wisely.

As a newbie investor, if you want to avoid losses and ensure that you stay profitable, you should only invest when candlestick charts portray a consistent volume in the market.

2. Compare the Indicators

When investing in futures trading avenues like forex, you need to be careful about the indicators of the market. The act of validation of one indicator with one or more indicators is called confirmation. You must learn how to perform “confirmation” to avoid making mistakes.

Learn candlestick setups so you can identify if a market is overbought or oversold. Other than that, invest more time in understanding the science behind indicators to avoid making any mistakes.

3. Analyze the Market Share

Before investing a single penny in the market, you have to check if the market state is suitable. The easiest way to analyze the market state is by looking at candlestick charts. By using candlestick charts, you can understand the price action of a specific product in the market.

Candlestick charts will allow you to identify if the prices are moving forward or not. There are three traditional ways of identifying the market state:

  • Trending
  • Rotational
  • Pending reversal

The term “trending” is used for marketing when there is a periodic presence of higher highs or lower lows in the market. “Rotational” refers to the market state when investors only trade within a defined range. And “pending reversal” suggests the situation of price exhaustion.

Here is how you can use candlestick charts to identify the market state:

  • The market state is trending if you find Doji stars, hanging man, inverted hammer.
  • Market state is rotational if you find Dojis, inside candles, and channels.
  • The market state is reversal if you find Hammers and morning/evening stars.

3. Reasons for Using Candlestick Pattern Trading

It is undoubtedly difficult to use candlestick charts whether you’re a newbie investor or have been investing for years. The question is, why should you bother to spend a lot of time understanding how candlestick chart investing can be done in the first place?

Here are three simple reasons why candlestick charts are one of the few reliable charts every investor can rely on!

  • Understand how the Market Works

The most important thing you need to focus on as an investor is ensuring that you know about the dynamics of the market. If you cannot predict the future trends in the market and make decisions like skilled investors, you won’t be able to stay profitable as an investor.

This is why you need to learn the dynamics and psychology of the market the right way. Using candlestick charts can make it easier for you to analyze the market and draw useful conclusions about it.

  • Integrate Data with Tech Tools

Gathering as much data as possible is the only thing that can help you make the right decisions as an investor. However, if you don’t know how to make sense of the data, you won’t be able to make the right investing decisions. This is why you need to use tech tools to help you make sense of the data.

The easiest way of exploring analytics of the market is by integrating candlestick charts with tech tools. There are several online tools that can help you use candlestick charts without spending a lot of time and effort.

  • Customize According to Your Needs

Customizability is the most important thing you need to focus on when using any chart to make investing decisions. If you aren’t able to customize the data you can feed to a chart, you won’t be able to avoid investing mistakes.

The best thing about candlestick charts is that they are super customizable and allow you to feed data about all the aspects of the market.