Do you know the inside of the candle?
Updated
A typical candle will have an Open, High, Low, Close. You will see these referred to in some text, articles and indicators as O,H,L,C
Below is the structure of both a Bullish (Green) & Bearish (Red) Candle
The cycle shown below, is the action within a candle, think about this – the candle opens at say 100, it dips to 95 and starts gaining ground to 120, before dropping a little to 115 and closing there.
Why is this important?
Think of it like a football (soccer) match – the game starts and plays out during a set time, much like the candle – and at the end we have a score. The actions in the match tell the story, but it’s the end result that counts.
So, what is the story?
The middle of the candle known as the body is equal to the spread and gives a clue as to the sentiment of this particular candle.
Sentiment
A wide spread gives the indication of strong sentiment, of course if the candle is red with a long body it would be strong bearish sentiment.
If the body is narrow – it suggests a weak bias overall.
Do the wicks matter? – well yes, of course. They tell another story, the wick can give you the equivalent of the match highlights – how much time/effort was committed in the oppositions half. If you think of it still as a sports match.
Although the body (spread) is small this image shows a different type of strength, well actually it is more weakness to the upside than downside strength. The market has tried to push higher and failed.
Wicks in some more detail.
Inside the wick you can see effort with lack of reward. Shown in the image above, this can be exaggerated and emphasised if accompanied by a small body or spread. Especially in the other direction. By this I mean a large wick on the top and then the bar closing red would have emphasis on bearish sentiment – however, a small red body would show little buying interest but no real intent to the downside.
The candles can tell a story, often on their own. However various formations give more detail and can be used to identify events prior to a major move.
This is especially powerful when used with some other methods, that can zone in on areas of interest.
Did you know?
Inside TradingView indicator tab; there is a sub section for candlestick patterns – to automate the recognition.
This feature has several scripts for Doji, Engulfing, Hammers, Spinning tops and many more.
This was only a quick dive into candlesticks – nothing major and not much depth, but as usual, I hope this helps even with the appreciation of what a candle represents.
Some additional educational posts;
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Below is the structure of both a Bullish (Green) & Bearish (Red) Candle
The cycle shown below, is the action within a candle, think about this – the candle opens at say 100, it dips to 95 and starts gaining ground to 120, before dropping a little to 115 and closing there.
Why is this important?
Think of it like a football (soccer) match – the game starts and plays out during a set time, much like the candle – and at the end we have a score. The actions in the match tell the story, but it’s the end result that counts.
So, what is the story?
The middle of the candle known as the body is equal to the spread and gives a clue as to the sentiment of this particular candle.
Sentiment
A wide spread gives the indication of strong sentiment, of course if the candle is red with a long body it would be strong bearish sentiment.
If the body is narrow – it suggests a weak bias overall.
Do the wicks matter? – well yes, of course. They tell another story, the wick can give you the equivalent of the match highlights – how much time/effort was committed in the oppositions half. If you think of it still as a sports match.
Although the body (spread) is small this image shows a different type of strength, well actually it is more weakness to the upside than downside strength. The market has tried to push higher and failed.
Wicks in some more detail.
Inside the wick you can see effort with lack of reward. Shown in the image above, this can be exaggerated and emphasised if accompanied by a small body or spread. Especially in the other direction. By this I mean a large wick on the top and then the bar closing red would have emphasis on bearish sentiment – however, a small red body would show little buying interest but no real intent to the downside.
The candles can tell a story, often on their own. However various formations give more detail and can be used to identify events prior to a major move.
This is especially powerful when used with some other methods, that can zone in on areas of interest.
Did you know?
Inside TradingView indicator tab; there is a sub section for candlestick patterns – to automate the recognition.
This feature has several scripts for Doji, Engulfing, Hammers, Spinning tops and many more.
This was only a quick dive into candlesticks – nothing major and not much depth, but as usual, I hope this helps even with the appreciation of what a candle represents.
Some additional educational posts;
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Note
Some basic education. Here's an introduction to the MACD indicator.
Note
in addition to a simple understanding of Trendlines.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.