Candles in Trading: What you Need to Know

Here are numerous strategies involved in Forex trading. In this brief article we are talking about Candles, and the Three Candles Strategy. What is it, and how does it benefit you and your trading success? Let’s have a closer look at the three candle Forex strategy and what it is all about.

What is the Three Candles Strategy?

Three Candles involves plotting a graph using candle-shaped symbols. They display the rise and the fall of the stock being followed. There are variations on it, but the basic model is created by plotting the opening and closing prices of the three candlesticks to determine where to enter the trade. Usually, this will be at the end of the third candlestick. The link above explains it in full detail. Now we need to talk about the Fractal Candle and the Spike Candle.

The Fractal Candle Explained

The fractal candle model is well known in trading circles and uses five rather then three candle symbols to follow the price and find an indicator. Put simply, a rush of ascending fractals is known as a ‘bullish breakout’ and descending a ‘bearish fractal’. Initially the idea was to take either breakout as a point at which to enter the trade. However, traders using the fractal candlestick model tend to set their own rules as to how to interpret the indicators.

How to Use the Spike Candle Indicator

The spike candle is the third part of the indicator model. Spikes occur when an external factor influences the market – panic buying, for example, or the recent pandemic, or simple greed – and can be upward or downward. Typically, the spike is short lived and the trend reverses. An upward spike can signal a good time to get out of a trade and downward vice versa.

We hope we’ve given you some idea of what Candles are about, so read further and you’ll understand the strategy in more detail.

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