Student’s Question:Every so often a “closed candle” is mentioned. What exactly is that?Instructor’s Response:Each chart has its own time frame be it Daily, 4 hour, 1 hour, 30 minutes and so forth. Each individual candle on any chart represents the time frame of that chart. So a candle on a Daily chart represents one day, 24 hours of trading time. Each candle on a 30 minute chart, for example, represents 30 minutes of trading time.At the end of the candle’s duration, let’s say 30 minutes, that 30 minute candle is considered to be “closed” and a new candle immediately opens. It is at that point that we would be able to use that just closed candle as part of our analysis. Until a candle is closed, we really do not know what kind of a candle it will ultimately turn out to be so we cannot base any trading decisions on an “open” candle…that is, one that is not closed.Take a look at the chart below for a visual on this…The last candle on the right side of this Daily chart, the one that is yellow in color, is open. As is mentioned on the chart, when it closes it may be below the trendline indicating a break and an opportunity to short the pair. Or, it may close above the trendline indicating that the trendline is still intact. Since as traders we have no way of knowing ahead of time, we should wait until it becomes a “closed candle” giving us a more accurate assessment.
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