4.1 Different Types of Gold Charts

1. Line Chart

• What it is: A simple line connecting closing prices over time.

• Use: Provides a clear view of general trends.

• Pros: Easy to read; shows overall direction.

• Cons: Limited detail; does not show intraday volatility.

Best for: Big-picture view of price movements.

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2. Bar Chart (OHLC Chart)

• What it is: Each bar represents a time period (hour, day, week) and shows:

  • Open: Price at the start

  • High: Highest price reached

  • Low: Lowest price reached

  • Close: Price at the end

• Volatility:

  • Long bars → high volatility

  • Short bars → low volatility

Best for: Spotting trends and volatility in price movements.

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3. Candlestick Chart

• What it is: Easier-to-read version of a bar chart.

• Components:

  • Real body: Difference between Open and Close

  • Wicks/Shadows: Highest and lowest prices during the period

  • Colors: Typically green = bullish (up), red = bearish (down)

• Why it’s useful:

  • Visualizes bullish/bearish trends intuitively

  • Helps spot trend reversals and inflection points

Best for: Discerning trends and possible reversal points.

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4.2 Candlestick Anatomy

• Real body: Height shows price movement between Open and Close

  • Short → little movement

  • Long → significant movement

• Wicks/Shadows: Show market sentiment

  • Long top wick → price tried to rise but fell → bearish signal

  • Long bottom wick → price fell but rose → bullish signal

  • Short top wick → price closed near high → bullish

  • Short bottom wick → price closed near low → bearish

• Colors:

  • Green = bullish (Close > Open)

  • Red = bearish (Close < Open)

  • Customizable as long as consistent

Each candlestick tells a story about the trading activity in that period.

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4.3 Candlestick Patterns: Bullish, Bearish, and Consolidation

Candlestick patterns indicate potential trends but are not guarantees.

Bullish Patterns (uptrend signals)

1. Hammer: Short green body, long bottom wick → reversal during downtrend

2. Inverse Hammer: Short green body, long top wick → bullish reversal in downtrend

3. Bullish Engulfing: Small red candle followed by larger green → bulls in control

4. Three White Soldiers: Three consecutive green candles → strong upward momentum

5. Bullish Rising Three: Five-candle pattern; middle three red candles stay within first green candle range → upward continuation

Bearish Patterns (downtrend signals)

1. Hanging Man: Short red body, long bottom wick → reversal in uptrend

2. Shooting Star: Short red body, long top wick → indicates downturn

3. Bearish Engulfing: Green candle followed by larger red → sell-off potential

4. Evening Star: Long green candle → indecisive candle → red candle → trend reversal

5. Bearish Falling Three: Five-candle pattern; three small green candles between two red → downward continuation

Consolidation

• Price movement is flat, often preceding either a bullish or bearish trend

Candlestick patterns are trend indicators, not guarantees. They help traders anticipate market movements and spot trading opportunities.

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Module Recap

• Gold charts (price action charts) are essential for reading trends and spotting reversals.

• Three common chart types:

  • Line chart: Simple overview of trends

  • Bar chart: Shows OHLC and volatility

  • Candlestick chart: Detailed and intuitive view of trends

• Candlestick anatomy:

  • Real body: Open vs Close

  • Wicks/Shadows: High/Low and market sentiment

  • Color: Green = bullish, Red = bearish

• Patterns:

  • Bullish: Hammer, Inverse Hammer, Bullish Engulfing, Three White Soldiers, Bullish Rising Three

  • Bearish: Hanging Man, Shooting Star, Bearish Engulfing, Evening Star, Bearish Falling Three

  • Consolidation: Flat periods before trend continuation

Candlestick charts provide a visual story of market activity, allowing traders to make informed decisions.