I understand purchasing the base currency requires selling the counter currency. What my difficulty is understanding what currency is represented by the Japanese candlestick. After I have purchased the base currency, is it the base currency that is represented by the candlestick?
The candlestick represents where price has been during that period for whatever timeframe you are on. The ‘price’ being the buy and sell price for that pair.
The body of the candlestick represents the Open and the Close prices and the wicks show the highs and the lows.
Hopefully that makes sense…
The price of a forex pair actually means the exchange rate between the one currency and the other. This is normalised so that the base currency has a value of 1. The chart follows the movement of this rate and this can be expressed in a candlestick form. Traders bet on the movement of the exchange rate, but we are not actually buying or selling currency
Don’t worry about it ! - as far as we are concerned - it’s just a dot moving up and down on a piece of paper. The candlestick reports where that dot has been in the time period !
A candlestick is a way to track price on a chart. There are a few ways to track price on a chart like bars mountain line and candlesticks. It’s just another way for traders to see whether price is going up or going down. Complete the Babypips course and all will be revealed
Candlesticks show the exchange rate, the movement of the price.
Ok I got that part and thank you for the insight. I would like to ask you, “Is the price fluctuation with candle sticks a reflection of the base currency price increase or decrease compared to the counter currency?”
Rising prices in a forex pair indicate that the price of the base currency is rising in value against the counter. Falling prices indicate that the base currency is falling in value against the counter.
That doesn’t mean that in other relationships the base currency is becoming more expensive to buy or gaining a higher value to hold. Its very common for example for the EUR to be rising against the GBP but falling against the USD.
There’s no need to get hung up on currency prices as such - currencies don’t have a universal fair price or inherent value - but we’re not buying or selling currency, we’re betting on the movement of exchange rates between one currency and another.)
Your explanation was AWESOME! and now I get. I was reading fare to much into it.
I have difficulty in understanding candle sticks