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What is a Candlestick?
What is a Candlestick?
Type of price chart used in TA that displays the high, low, open and closing prices of a security for a specific period.
Rectangular sections are known as the real body, representing the range between the session's open and close
Thin lines above and below are the shadows, representing the session's price extremes
Shadow above is the upper shadow
Shadow below is the lower shadow
Characteristics of the Candlestick
Characteristics of the Candlestick
When the real body is black (or red), it means that the close of the position is lower than the open
When the real body is white (or green), it means that the close was higher than the open
Peak of the upper shadow is the high of the session
Bottom of the lower shadow is the low of the session
If candle has no upper shadow, it is said to have a shaven head
If the candle has no lower shadow, it is said to have a shaven bottom
Limitations of Candlesticks
Limitations of Candlesticks
Does not provide price targets, require western technicals or trend analysis to forecast price targets
Candlesticks and by extension reversal patterns does not signal the extent of the move, only the reversal of a trend
Types of Candlesticks
Types of Candlesticks
Spinning Tops
Spinning Tops
Small real body (red/green or black/white)
Can signal that the bulls/bears are losing domination
A first sign of a potential reversal
Doji
Doji
Does not have any bodies
Represents a session when the open and close are the same (or very close to each other)
Implications as a reversal signal
Umbrella Lines
Umbrella Lines
Candles with very long lower shadows and a small read body at the top of the range
Can either be bullish or bearish
Hammer/Hanging Man
Hammer/Hanging Man
If umbrella line emerges during a downtrend, it signals that a downtrend should end (aka a "Hammer")
If umbrella line emerges after a rally, it signals a potential reversal (aka "Hanging Man")
Can be for either green/red (white/black) umbrella lines
Last Updated: 27 October 2021
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