Long wicks on a candlestick charts can provide valuable trading signals in the forex market. Forex trading involves risk.
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If we continue with our previous example here are the wick percentages.
Liquidity wick forex. From the perspective of a trader liquidity is very important because it determines how easily price can change over a giv! en time period. When to use which in the following slides i have indicated general price action related movement in the market in relation to formation of candle bodies and candle wicks. The top wick is 5 pips divided by 53 pips 10700 10647 for 94.
Forex candle bodies wicks. The wick percentage of the bottom wick is bottom wick size divided by total candle. Wicks are an interesting phenomenon in price action formations and are virtually a part of every candlewicks can form on the top bottom or both sides of a candle and represent the highs and lows of the price action for that candle on that time period.
Liquidity risk in forex when traders are trading with a brokerage who executes client orders using a no dealing desk model stpecn brokers retail traders are exposed to what is known as liquidity risk. Losses can exceed deposits. Learning how to read them is an important skill for any trader to master.
The for! eign exchange forex market is often described as the worlds mo! st liquid financial market and thats true. This makes it very easy for anyone to buy and sell currencies. However having a large amount of currency in hand you cant sell it fast during the period of low trading liquidity without incurring substantial losses in the form of trading costs.
But it doesnt mean that currencies arent subject to varying liquidity conditions that currency traders need to keep in mind. When we see wicks wicks generally are telling. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading.
Losses can exceed deposits. Wicks are one of the things that have bene the most profitable type of pattern for me over the years although of course i dont only trade wicks. Broker liquidity and the risks of low liquidity one of the core benefits of forex trading is a possibility of quick exchange.
As you go through the charts see if you can spot a! ny other patterns indicated by bodies and wicks and if you agree with my observations. The scale of the forex market means that liquidity the amount of buying and selling volume happening at any given time is extremely high.
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