If you’re interested in learning how to judge the market’s strength, one of the best ways to do it is to practice trading candles based on color.
Looking at candle colors is one of the easiest ways, even for beginner traders, to judge how strong the current market is. When you’re on the Binomo platform, you will see that there are two different types of candles: green and red.
Green candles are basically bullish candles. They show that more traders are buying than selling. Red candles, meanwhile, are bearish candles. When you see a lot of red candles it means that traders are selling more rather than buying. A consecutive pattern of green candles signifies an uptrend, while a consecutive pattern of red candles shows a downtrend.
On today’s guide, we’ll show you how you can use the different candle colors to trade for profit on the Binomo platform. Although the description above may seem easy enough, in practice, it’s actually a bit more complicated than that. So if you want to become a successful trader in different markets, you have to familiarize yourself with trading candles and what they mean depending on the color.
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How to use trading candles on Binomo
The reason why a lot of traders, myself included, prefer using candle charts instead of other types of charts is that candle charts are because they are easy to read.
One look at a candle chart is usually enough to get a general feel of how the market is doing at the moment. For instance, if you see that there are more green candles than red ones, that means the market is currently bullish. Depending on the trend, it might be a good idea to enter a buy position and reap the profits before the market goes down again.
On the other hand, if there are more red candles than green, then you’re looking at a bearish market. You can enter a sell position before the market goes way down, or you can enter a buy position if you think the bearish trend is about to end soon.
Like I mentioned above, although reading candle charts may seem super easy, it does take some practice to actually familiarize yourself with them in a way that will help you earn a profit. In this guide, I’ll help you get started!
Set up the trading chart
The first thing you need to do is to set up your trading chart.
First, select the asset you want to trade. For example, let’s say you choose the AUD/JP currency pair. Next, select what time frame you want to trade. I recommend a 5-minute time frame. Lastly, enter the amount that you’ll be trading.
Determine how long the trade will last
Again, my recommendation would be to trade in the short to medium term. In my case, I usually use 5-minute trades.
Why exactly do I use 5 minutes? Well, 5 minutes is not long enough that it gets boring, but also not short enough for the market to become too volatile. Anything below 5 minutes is too fast for me.
With 5 second trades, I get to trade immediately based on color once the candle starts developing. And based on my experience, once a green candle starts developing, I typically hit higher because it usually ends in green as well.
You can change this setting via the time period at the lower left part of the trading interface.
Place your trade position
When you’re done with all that, it’s now time to enter a position! Depending on the color of your candle, you can hit higher or lower. If it’s green, it’s usually good to hit the “higher” button. And if it’s red, the “lower” button is usually the better choice.
Why is trading candles profitable when trading on Binomo?
“But,” you may ask, “why exactly is this method profitable? Why do I need to analyze the colors? Why should I trade in 5-minute timeframes? What’s so special about this strategy?”
There are three main advantages to using this method when trading on Binomo.
Price fluctuations are rare
Simply put, at 5-minute intervals, price fluctuations aren’t very common.
If you have a Binomo practice account, try trading on a 2-minute interval followed by a 5-minute interval. You’ll find out almost immediately that prices during 2-minute trades tend to fluctuate a lot more. If you change it to 30 seconds, you’ll experience even more fluctuations – a huge reason why many traders can’t trade properly in such short intervals.
When trading candles based only on their color, 5-minute trades are the safest timeframes to enter because they usually end up in the same color that the candle began. So if a candle started out green, it’s likely to end up green as well.
You only place 1 trade at a time
Whenever I do trades based on candle color, I make sure to only place 1 trade at a time. This is very important when using this method.
The biggest downside to this is that it rarely makes me a considerable amount of money, if any. That’s because just one wrong position can make me lose a significant amount. Remember, everything happens within a small timeframe, so it’s easy to enter one wrong position after the other.
If this happens to you, I suggest that you only enter your next trade if you think the candle will end in your expected color. For example, if you see that a green candle is developing and you’re pretty certain that it will end in green, only then should you entered a “higher” position. That’s the best way to make money using this strategy.
It’s a simple way to make money trading
Last but definitely not least, this method is a relatively simple way to make money trading, given the associated risks.
There’s no need to spend a lot of time studying technical indicators. You don’t even have to research about various strategies. All you need to know is how to quickly analyze candle charts and you’re good to go.
This is a good thing because it means you get to spend more time actually trading than checking out different indicators. If you’re trading on the 5-minute time interval, you only have to check out all the patterns from the last hour.
That said, your quick analysis of the chart is very important when trading using this strategy. Again, if you see a candle developing, wait for a few seconds to a minute to observe its movement. After that, it’s safe to say that it’s going to end the same color.
We also have plenty of other guides here on Binomo that can help teach you how to make money trading candles. Check them out if you’d like to learn more!
Disadvantages to only using trading candles
As with everything, there are some disadvantages when using this strategy as well.
Low profits when trading alongside Martingale system
We’ve already discussed the Martingale system a couple of times on this website. But if you haven’t heard about it yet, it’s basically a trading strategy that involves increasing the amount to trade for every losing trade you make. It’s only when you profit that you’re allowed to lower the amount again.
If your first trades happen to be profitable, you’ll probably get just a small return. Believe it or not though, this is actually the better outcome. The worst outcome is if your trades continue losing and you end up wiping out your entire account. So please bear in mind the associated capital loss risks.
Here’s a chart to help explain the Martingale system better:
Learning how to do it properly takes some time
Implementing the actual method may be easy, but learning how to do it properly does take some time, too. Not to mention, it also requires you to have some knowledge regarding how markets have been moving over a specific period.
What I personally do is I start trading by quickly analyzing the trend over 3-hour, 30-minute, and 15-minute time frames. By doing so, I can see which patterns have developed over those specific periods. I also ignore all special candles and consider only normal candles. Doing this takes some time, but it’s very effective and it makes my 5-minute trading sessions much smoother.
Less of a strategy, more of a skill
Actually, in many ways, this method is less of a strategy and more of a skill. What do I mean by this? Well, when you say strategy, it usually involves doing something based on a set of instructions. But there’s no specific set of instructions that you can follow when using trading candles to trade profitably. This means that it’s an acquired skill, not a strategy. And like any other skill out there, you need to develop it yourself until you get better with time.
Over time, you’ll learn when to best enter a trade – something that’s very important using this method. Missing the best entry point means potentially losing the trade. You have to do a lot of practice on your free Binomo account so that by the time you start trading with real money, you’ve already developed the necessary skills to earn profits.
Conclusion
In conclusion, trading with candles is a relatively simple and easy way to earn money by trading, especially for beginner traders (but bear in mind the associated risks). After all, you no longer need to learn things technical analysis tools and indicators. However, it’s not a perfect method either. Returns can be pretty low, plus, you still need to spend some time learning and studying the markets.
In addition to this, this method is more of a learned skill than a handy strategy. The more you use it, the easier it gets for you over time. And once you’ve got it down pat, it’s certainly one of the easiest potential ways to earn money while trading on Binomo.
Don’t forget to sign up for a free Binomo practice account as soon as you can! You’ll be able to practice using this method there before jumping onto the real deal.
Good luck on your trading journey with Binomo!