Why Do So Many Traders Use The Candlestick Charts For Trading?

Why Do So Many Traders Use The Candlestick Charts For Trading?

Trading is made simpler with the help of bots like Ethereum Code. If you read more about Ethereum Code and other similar trading bots you would realize that these bots use technical analysis to make trading decisions much like traders do. No matter how clever you are and no matter how strong your trading strategy is there would always be another trader out there who might manage to outperform your attempts. This realization is what keeps a trader learning and improving his trading knowledge continuously. And the increase in the use of trading bots has also been attributed to this competitive scenario in the stock market. So every trader wants to follow the path that would lead them to trading success and help them make good profits. There are several types of charts used by traders to study the price movements of any given asset. The candlestick pattern has grown to be one of the most popular charts used by traders around the world.

What is a candlestick chart?

The name is attributed to the appearance of the price movement plots in the chart which look like candlesticks. There are two main parts in any given candlestick- the body and the shadow on both ends (wick and tail). The upper and the lower portion of the body would indicate the open and close price values and the shadows would indicate the highs and lows. The bearish and bullish trends would be indicated by red and green color respectively. So with a single candles stick a trader would be able to gather plenty of useful information.

Benefits of candlestick charts

  1. Length of the candlestick indicates the volatility

The length of the shadows might indicate the overall ups and downs of the chosen stock. The body length, on the other hand, indicates the difference between the closing and the opening price. A longer body would indicate an active or a volatile stock.

  1. The direction of price can be found from the color of the chart

If there are many candlesticks in green occurring day after day this would indicate a continuous bullish trend. This can also give a glimpse of the marker condition in general.

  1. Identify trend reversals if any

If there are erratic changes in the color of the candlesticks, say a long period of green sticks followed by sudden red sticks then this might indicate a possible trend reversal situation.

The exact values of the price can give traders the exact window to enter a trade and the length and color can help compare and pick a suitable stock.