One of the simplest methods of determining market strength is observing the candles. You will find they exist in two colours.
The candles that are green indicate buyers dominance on the market. When the reddish candles are in the majority, it means the sellers are taking over the prices. When the candles of the same colour appear one after another, there is a trend. Green candles will signify an uptrend and the red ones a downtrend.
It may sound simple but there is more to it. Read this article and you will learn how to utilize the candles to your advantage on the Olymp Trade platform.
- 1 Using candlesticks at Olymp Trade
- 2 What makes trading candles at Olymp Trade a good choice
- 3 Disadvantages of candles colour based trading
- 4 Summary
Using candlesticks at Olymp Trade
There are a few chart types you can choose from on the Olymp Trade platform. I recommend using Japanese candlesticks just because it is relatively easy to read. The candles are in two colours. The green ones are also known as the bullish candles and the red ones as bearish.
The simplest way to trade with the colour of the candles is to place a buy order whenever a bullish candle is developing and a sell trade when you spot a bearish candle. Once the order is placed you just wait for a candle to close and gather the profit.
It sounds easy but there are not many traders who actually manage to master the skill of reading candles in this manner. So I wanted to help you understand how to trade with candles and I wrote this article.
Configure the chart
The chart type easiest to read is the Japanese candlestick one. There is no point in complicating things at the beginning, so set the chart and determine the timeframe. The 5-minute period will be a good idea. The next step will be to write your investment amount.
Specify the duration of the trade
The transactions should not be opened for too long. I am choosing 5 minutes but not as a duration. You should choose expiration instead of the duration and adjust the time in the top right corner of the trading platform. Expiration time should be set as an end of a 5-minute candle.
5 minutes is a good period because I am able to place an order immediately when a candle begins to develop. And more often than not, a candle will end up the same colour it has started. So when it was green and I went long, the probability it will close as a green candle after 5 minutes is quite high.
Enter the trade
The last thing you have to do is to hit the green or red button meaning you either go long or short. It will naturally depend on the colour of the candle. If you notice a green candle starts to develop, you will hit the green button. When the red candle appears, you will click the lower red button.
What makes trading candles at Olymp Trade a good choice
There is no need to be concerned about the price movements
It is interesting to note that when you switch the candle’s interval to 1 minute, you will see that the price is changing quite a lot. And if you choose 15 seconds, there will be just more price movements on the chart.
But with 5-minute timeframe and focusing only on the colour of the candles, the probability one candle will close the same colour it has begun is quite big. So the price movements are not something you should worry about.
Open one transaction at a time
Following the colour-based strategy, you place just one order at a time. If you traded based on price fluctuations, you would open numerous positions. But this would be not the best idea. The price fluctuates often and when it went against you, you would lose a lot of money.
Wait for a new candle to begin growing and place one trade at a time. The chances it will finish the same colour are quite big and this is the way to make money.
The colour-based strategy is uncomplicated
You need to observe the chart and focus on the colour of the candles. You do not use additional indicators so you do not need to spend time reading them. You use all the time you have at the computer desk searching for good opportunities to open the trade.
The analysis is down to candles colour observation with 5-minute timeframe set. I am able to open the positions only seconds after the candle starts to develop. You need to be fast here so the probability of ending up in the same colour is higher.
Disadvantages of candles colour based trading
Low returns while trading the martingale money management system
The main rules of the martingale money management system are to trade the same colour of the candle until you win, only then you switch to another colour, increase the amount you put in a trade until you get a winning trade, in case of winning you place the next order with the very small amount again.
So if you win trade after trade, you will get a very small profit. But if you lose multiple times, which is quite unlikely in trading candles colour, you increase the investment amount and this may cause your account to be cleared.
Although it sounds so simple, and I am not saying it is difficult, it does require investing your time in learning the strategy. Because it is not only looking at the chart and opening the trades. You should also take into account the price movements during the previous period.
With 5 minute candles, I normally first look at the chart over 3 hours, 30 minutes and 15 minutes period. Like this, I can distinguish patterns in the price movements.
It is rather a skill than a strategy
The trading strategies guide you through the trading process showing you what to do and on which market it can work. Using the colour-based method is more of a skill that you need to learn with time.
This is about the perfect moment of entering the trade. You should do it at the moment when the candle has just begun to develop. Once you fail to catch the opportunity, the chances of ending up losing significantly grow. The best thing is to train a lot and there is an Olymp Trade demo account you can use for that. Like this, you will not unnecessarily lose real money.
The method described in this guide propose trading based on candles colour instead of the price fluctuations. You will need to invest a lot of time to analyse the markets and learn the necessary skills. You will have to be patient.
Colour-based trading means you do not use any extra indicators. This makes it quite easy then because you can focus on the candles exclusively. Once you master the skill of trading candles colour you will be on the right path to earning money at Olymp Trade.
The last thing I want to tell you is do not waste the time. Go to the Olymp Trade practice account and start trading now. You are more than welcome to share your results with us in the comments section below.
Enjoy the trading!
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