Binary option tutorial: How to read a candlestick graph to predict trends
What does the graph represent? This graph represents the currency pair EUR/USD, which is one of the most popular on the Forex market. The curve is in “candlestick” formation. This type of graph is widely used by traders, as it gives a clear view of the market situation over a period of time.
How do you see an asset’s evolution? You can adjust the EUR/USD pair’s evolution over different time periods. This can be one minute, five minutes, one hour or 24 hours. When dealing with binary options, it is strongly recommended to stick to a period of one to five minutes, to give more of a short-term view.
How is the asset’s evolution displayed? The vertical bars, also called candlesticks, represent a unit of time. For example, if you set your graph to five minutes, each candlestick then represents the underlying asset’s progression over a five-minute period. The data underneath the graph allows you to place the curve at a precise moment, and you can see the value of the currency pair along the y-axis.
What does the candlestick height mean? The height of a candlestick represents the buying and selling volume. The taller the candlestick, the more buying and selling volume took place. If the opposite, the shorter it is, the less buying and selling volume took place. A green color means a bullish trend, and red means a bearish trend. The fine lines accompanying the candlestick graph are shadows displaying the highest or lowest price over a period of time, according to the direction that the line takes.
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