A basic understanding of candlesticks & their psychology.
For every price action trader and naked chart trader, the candlestick plays the main role to understand the market direction. There are some basic candlestick types you must understand before your start trading in binary options.
Healthy candle:
A candle with a healthy body having small wicks is known as a healthy candle.
Marubuzu candle or big candle:
Marubuzu candle is very big in size therefore we must avoid trade on the next candle. The causes behind the big body formation of the Marubuzu candle could be either a big power or exhaustion.
In the buyer's case, either it could be the big power of buyers or the exhaustion of buyers. And same for the seller's case, either power of sellers or the exhaustion of sellers.
As per candle psychology, big power indicates that the probability of next candle would be continuation candle and exertion means it’s a high probability that next candle would be reversal candle. Therefore, it is highly advisable to avoid trade on a candle after the Marubuzu candle.
Doji candle:
A candle without a body is known as a Doji candle. This candle is also called an indecision candle. The formation of a Doji candle is because of equal pressure of buyers and sellers. The opening and closing price of the candle would be the same.
The colour of Doji doesn’t matter as the working of all Doji candles is the same. It is highly advised to avoid trade on the next candle after the Doji candle except for some sure-shots signals based on the Doji candle. You will know in detail about these sure-shots signals later on.
Spinning top:
A candle with a small body having long wicks on both sides is called a spinning top candle. This candle indicates indecision for the next candle formation.
Hammer :
There are two types of hammers, hanging man or normal hammer and inverted hammer. A candle having its wick 2.5 times bigger than its body, is called a hammer candle.
As per the candlestick psychology, the hammer works differently in the trending market and different in a ranging market.
Hammer is a dangerous candle for trading therefore we advise you to avoid trading with this candle except for some sure-shots signals provided in this article.
Tailless candle:
As the name suggests, a candle without a tail is known as a tailless candle. A tailless candle is a very strong candle therefore, the probability for the next candle would be a continuation candle, but it depends on other factors too. We will trade with a tailless candle but only with the help of sure-shot signals provided.
Shaved candle:
The Shaved candle is a candle without wicks. This candle gives us very little knowledge about the next candle formation so we avoid trading with this candle.
Pin Bar candle:
Bearish Shaved Candle A pin bar is a Japanese candlestick that has a long wick (tail) on one side and a small body. The area between the open and close of the pin bar is called its “real body”, and pin bars generally have small real bodies in comparison to their long tails. The tail of the pin bar shows the price rejection.
