Candlesticks are used as one of the heaviest founding pillars of technical analysis. Candlestick wick analysis helps traders to obtain meaningful insights into price movement.
A wick is the thin needle-like vertical part of a candle extended on either side of the candle body. Candles comprise four values, namely high, low, open, and close. Wicks indicate the high and the low for a particular period.
Let's discuss the importance of a wick from a logical point of view!
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By wick size, you may develop an idea of the upcoming trend and how you should plan your next trade.
Let’s say, a candle opened at 90, travelled in the range of 80 to 95 and closed at 92.
In this case, the wick below = open-low = 90- 80, i.e. 10
And the wick above = high-close = 95-92 i.e. 3
Wick percentage can help you derive a better insight into the ongoing market sentiment.
To calculate it, let's say you have a wick of 10 pips and candle size (high-low) is 20 pips. Then the wick percentage is simply 10/20, i.e. 50%
The formation of multiple long-wick candles indicates repeated price rejections from support or resistance zones, which in turn, can reveal upcoming reversals.
Wick analysis, along with other technical indicators, is often used to gauge trend directions.
As the wick percentage and the candle shape show the control of buyers and sellers, it can help identify market sentiment.
Wick analysis is an important part of technical analysis. If you note wick size and percentage carefully, it may add better insights to your trading and investing journey.
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