In a psychological way, the price movement reflected on the candlestick runs because there is pressure from consumers and sellers. War on bullish and bearish forms a diverse candlestick.
- If there are several buyers in the market, then the market price can move bullish and at the end of the market period can be closed above the opening price. This form is referred to as a bullish candlestick. The ability of buyers can be measured from the movement of the market that moves from a low level to the top towards the closing price. In other words, the length of the candlestick reflects consumer dominance.
- If there are several sellers in the market, then the market price can move bearish and at the end of the period the market can close below the opening price. This form is referred to as a bearish candlestick. The ability of sellers can be measured by market movements that move from the highest level down to the closing price. In other words, the length of the candlestick reflects the dominance of the seller.
To identify the direction or possible shape of the next candlestick, there are 5 things that need to be observed:
- War on bullish and bearish
When the price dominates the market, the candle can move in the same direction. For example, the buyer controls the market, the candle can move bullish. As long as there is no fight from the seller, the candle shape can follow from the previous candle.
After more than one trader feels that the market is too high or overbought, the seller can fight. This event is meant by profit taking.
The battle between the buyer and seller is shown from the tail of the candlestick. If a war with greater pressure from domination could potentially make the winner control the market and this situation can change the direction of the trend or trend reversal . In other words, we are able to identify that candlesticks can then switch directions.
- Candlestick moves quickly
If the body candlestick is bigger than the previous body candlestick then it shows market enthusiasm. So for example when many Forex traders open positions, this power is sought in the market with a strong trend direction. Even for example there is resistance, in this situation we are able to estimate the next candlestick can be larger with the same trend direction from the candlestick with the previous trend.
- The candlestick moves slowly
Slowing candlesticks is the opposite of enthusiasm, there are doubts from many traders to open trading positions can make the market move a little slowly. This hesitation comes out because many traders think that the market trend has been too high, too low, oversold, overbought or maybe stuck in support and resistance. If there were no traders who opened trading positions, it could make the market move slowly because they did not have power.
In these circumstances we must be ready to open trading positions in the opposite direction, because the market can take over from buyers or sellers.
- Candlestick reverses direction
Overbought or oversold, there are some traders who try to end the trend and they want to change the direction of the trend. But this business begins with a market test. They can test the market to really be able to change the direction of the trend or not. This effort is marked by a long candlestick towards the opposite trend.
This condition runs before the time of the trend in the upper market, such a candlestick will build a candle in the opposite trend direction but at the end of the period the market price will pull back and close to the market trend.
This effort provides an indication that the market can reverse direction. In this situation we prepare to open trading positions in the opposite direction.
- Candlestick diverges
The slowdown and price reversal can be seen when most traders want prices to reverse in the market. But some traders still want to stay and are in the previous trend.
Candlestick divergence runs when there are traders who want to get a good price, when they already know that the market will turn around. In this situation we can see with technical indicators. In general, technical indicators can show divergence potential so that you can open new positions in the opposite direction from market trends.