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Candlestick Charts: Reading Market Psychology through Price Action

Candlestick Charts: Reading Market Psychology | Forex Basics

When you open MT4 or MT5, the first thing you’ll see is a series of red and green bars. These are Candlestick Charts. More than just price markers, they are the ultimate storytellers of fear and greed within the market.



1. Anatomy of a Candlestick

Each single candle provides four critical data points for a specific timeframe:

  • Open: The starting price of the period.

  • Close: The final price before the candle ends.

  • High: The highest price reached (the upper wick/shadow).

  • Low: The lowest price reached (the lower wick/shadow).



2. Green vs. Red Candles

  • Green Candle (Bullish): The Close is higher than the Open. This indicates that buyers won the battle and the market moved up.

  • Red Candle (Bearish): The Close is lower than the Open. This indicates that sellers dominated and the market moved down.



3. What do the Wicks tell us?

The Wicks (Shadows) are the thin lines poking out from the body. They represent "Price Rejection."

  • Long Lower Wick: Price dropped significantly but was pushed back up by strong buying pressure.

  • Long Upper Wick: Price climbed high but was slammed back down by aggressive selling pressure.



The Discipline of Waiting: The Discipline Message

The number one mistake beginners make is "Trading before the candle closes."

  • Wait for the Close: You might see a candle surging bright green and feel the "Fear of Missing Out" (FOMO). You click Buy instantly, only to see the price get crushed five minutes later, leaving a long upper wick and a red body.

  • Practice Patience: A disciplined trader always waits for the candle to "Close" to confirm the final price behavior. An unfinished signal is an unreliable signal.

"The closing price is the truth; the moving price is often an illusion."

Next Lesson: Now that you can read individual candles, we will zoom out to see where the market is heading. We’ll explore Trends, because trading with the trend is the simplest and safest way for beginners to profit.



สารบัญซีรีส์: พื้นฐาน Forex และวินัยสู่ความสำเร็จ

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