Candlestick Patterns: Its Importance To Brokers, Investors, And Analysts

Have you ever wondered how stock market analysts make their judgment on selling and

trading shares of stocks? It is really difficult for them to determine what shares will sell the most or what stock will be on a surplus. Understanding the flow of the market is needed to predict the future sales and lead them to more profit; but how they will understand the flow if they are only seeing numbers? This is why candlestick patterns are important because it illustrates how the market is running and by this, it is an essential tool brokers use in order to be triumphant in the battlefield of stock market.

Candlestick charts are said to have been developed in the 18th century by Homma Munehisa, a Japanese trader. The charts gave the legendary trader and others an overview of open, high, low, and close market prices over a certain period of time. Due to the level of ease in reading and understanding the graphs, this style of charting gained much popularity. And also the resulting patterns provided a reliable prediction of future demand.

Candlesticks are made of the body, and an upper and a lower shadow or wick. The wick signifies the highest and lowest traded prices of a security during the time interval represented. The body illustrates the opening and closing trades. If the security closed higher than it opened, the body is unfilled or white, with the opening price at the bottom of the body and the closing price at the top. If the security closed lower than it opened, the body is black, with the opening price at the top and the closing price at the bottom.

And also to predict the stock market, you must also give importance to its formation and analysis:

Candlestick Formations. It is the combination of different candlesticks that represents a day in a weekly or monthly interval. This shows the movement of demand in the stock market. Also the formation signifies the flow of the stock market, when is the time that there is a high demand or when is the time of high surplus. This formation greatly helps the analysts and brokers to decide properly on which stocks they will sell or retain.

Candlestick Analysis. It is the resulting conclusion or idea on how stock market had flown. This contains information on when there is a high demand, how high the demand on that time was, and the interval or length of time when there is a high demand or even a high surplus. This is actually a statement on what the candlestick pattern is depicting. With this, candlestick analysis is an important tool brokers use to predict the market accurately.

Certainly, stock market is not a place for everyone to enjoy and definitely not the place to make some costly errors. The place is so dynamic that a small mistake can trigger great losses. It is important to have a great knowledge regarding the candlestick patterns or formations, much more the analysis the latter will give. Because if not given much importance, brokers and investors may not gain profit out of this market place.

by: Kenneth Divinagracia

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