Candle Psychology | Read the candles like a pro | The Trade Therapy

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Candlestick movements on a chart represent changes in the price of an asset over a specific time period. Each candlestick provides information about the opening, closing, high, and low prices during that time frame. Here's why candlesticks move:

Market Activity:

Buyers and Sellers: The movement of candlesticks reflects the ongoing battle between buyers and sellers in the market. Green (or white) candlesticks represent periods when buyers were in control, pushing prices higher. Red (or black) candlesticks indicate periods dominated by sellers, leading to lower prices.
Price Action:

Open, Close, High, Low: The four main components of a candlestick are the open, close, high, and low prices. The candle's body represents the opening and closing prices, while the wicks or shadows show the highest and lowest prices during the specified time frame.
Time Period:

Candlestick Period: The time frame of a candlestick (e.g., 1 minute, 1 hour, 1 day) determines the duration of market activity it represents. Shorter time frames capture more rapid price movements, while longer time frames provide a broader view of market trends.
Market Sentiment:

Bullish and Bearish Sentiment: The color and shape of a candlestick convey market sentiment. Bullish candlesticks signal optimism and upward momentum, while bearish candlesticks indicate pessimism and downward pressure.
Market News and Events:

External Factors: External events, such as economic reports, company announcements, or geopolitical developments, can influence market sentiment and cause significant price movements. These events are often reflected in candlestick patterns.
Volume:

Trading Volume: The volume of trades during a specific period is crucial. High trading volume often accompanies strong price movements, providing confirmation of the significance of a price change.
Technical Analysis:

Technical Indicators: Traders use technical indicators, such as moving averages, RSI, MACD, etc., to analyze historical price data and identify potential trends or reversals. These analyses contribute to the patterns seen in candlestick charts.
Psychological Factors:

Trader Psychology: Human emotions, like fear and greed, play a significant role in market movements. Candlestick patterns can reflect shifts in trader sentiment and provide insights into potential trend reversals.
Supply and Demand:

Market Forces: The basic economic principle of supply and demand is a driving force behind price movements. When demand exceeds supply, prices rise, and vice versa.

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