Candlestick Chart Definition


A red short day candle means the bears were in charge but couldn’t drag the prices down much since there was less volume. A green short day candle means the bulls were in control but couldn’t pull the stock prices up due to low volumes. A short day candle typically shows a consolidation stage in stock prices after a rally. The wick or upper shadow connects the stock’s closing price (Rs 230.75) to its day’s high (Rs 233.65). A bullish candlestick with a wide price range and a relatively narrow body close to its highs. The candlesticks to the left represent the day’s price action in 4 hour intervals.

candlestick patterns

What Is a Candlestick Chart and How Do You Read One? – TheStreet

What Is a Candlestick Chart and How Do You Read One?.

Posted: Thu, 30 Jun 2022 07:00:00 GMT [source]

That is, each bar represents 1 intraday period of activity. In the 1-day chart at Yahoo Finance the period is 1-minute (i.e. each bar represents 1-minute of trading activity); the 5-day chart at Yahoo Finance uses 5-minute bars. The volume bar is the amount of trades that occurred during that 1-minute or 5-minute period. You can see this by moving your mouse slowly over the chart and watching the date at the bottom of the chart change for each period you move over. This is a three-candlestick pattern that consists of a large body followed by a small body followed by a large body. This is a three-candlestick pattern that consists of a small body followed by a large body followed by a small body.

Financial technical analysis is a study that takes an ample amount of education and experience to master. For simplicity, we will be talking about the basic patterns to be aware of when viewing candlestick charts and what the patterns may be predictive regarding price movements. Candlestick patterns typically represent one whole day of price movement, so there will be approximately 20 trading days with 20 candlestick patterns within a month.

Candlestick Pattern #4: Black / Red Marubozu

As this is a bearish continuation pattern, the bears are trying to take the upper hand. But on the first day, the bulls somehow succeed to push the prices up. As such, while the bar chart makes it look attractive to buy, the candlestick chart proves there is indeed a reason for caution about going long.

Unlike with regular candlesticks, a long wick shows more strength, whereas the same period on a standard chart might show a long body with little or no wick. A candlestick as this one is usually shaded red as the close is lower than the open. The Low and High caps are usually not present but may be added to ease reading. This is followed by three small real bodies that make upward progress but stay within the range of the first big down day. The pattern completes when the fifth day makes another large downward move. It shows that sellers are back in control and that the price could head lower.

There are two pairs of single candlestick reversal patterns made up of a small real body, one long shadow, and one short or non-existent shadow. Generally, the long shadow should be at least twice the length of the real body, which can be either black or white. The location of the long shadow and preceding price action determine the classification. If the asset closed higher than it opened, the body is hollow or unfilled, with the opening price at the bottom of the body and the closing price at the top. If the asset closed lower than it opened, the body is solid or filled, with the opening price at the top and the closing price at the bottom.


After the three candles, a long green candle is formed again and it completes the pattern. At, we have found the candlestick charts are most potent when merged with Western technical analysis. Accordingly, we harness the best charting techniques of the East and West to provide you with uniquely effective trading tools. Bullish patterns are a type of candlestick pattern where the closing price for the period of a stock was higher than the opening price.

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Traders can use candlestick signals to analyze any and all periods of trading including daily or hourly cycles—even for minute-long cycles of the trading day. Candlesticks originated from Japanese rice merchants and traders to track market prices and daily momentum hundreds of years before becoming popularized in the United States. The close price is the last price traded during the formation of the candle.

Moving the mouse over the chart will display the chart cursor. The details of the day under the cursor are shown in the top line of the chart area. The best way to chart candlestick is using the TradingView solution. It lets you chart candlestick and all other charting types and you can try it now for free.

Candlestick Pattern #2: Short Day Candle

A green body indicates that the stock closed higher than it opened, while a red body indicates that the stock closed lower than it opened. The second type of reversal pattern is the “inverted hammer”. This pattern is formed when the price of a stock moves up and then reverses to close near the opening price. The body of the candle should be small and the wick should be long. This indicates that the sellers were able to push the price back down despite the buyers’ efforts to push it up.

It is named such because it resembles an actual wax There are no certainties when trading, and analysing candlestick patterns are just one tool that a trader can use to make trading decisions. Any bar with a relatively wide price range and an open and closing price near its lows in an uptrend can be considered as a sign of weakness. Any bar with a relatively wide price range and an open or closing price near its lows in an uptrend can be considered as a sign of weakness.

  • Plus at PatternsWizard, our absolute focus is to bring you data-driven performance statistics.
  • The Structured Query Language comprises several different data types that allow it to store different types of information…
  • Stock charts are a useful way of viewing the historical price movement of a security.
  • Candlestick charts are composed of a series of “candles” that represent the opening, closing, high, and low prices of a stock over a given period of time.
  • The counterattack candlestick pattern is a reversal pattern that indicates the upcoming reversal of the current trend in the market.

Actually, this article helps me a lot about observing the candlestick chart but I have some unanswered questions.” To identify possible changes in trends by spotting certain candlestick shapes, it is always best to look at a candlestick chart for the last 1-4 weeks of activity. Doji candlesticks that have both long upper and lower shadows indicate that there is a lot of indecision in the market. Recognize that short bodies mean there was little buying or selling pressure.

Upside Tasuki Gap

As mentioned above, it gives the opening and closing prices, plus the maximum and minimum prices a particular stock reached intra-day. We need this chart to determine the possible price movement. As a candlestick represents one day, due to which for 20 financial days of a month, there are 20 candlesticks representing each day. There are a few candlesticks which indicate that a particular trend is going to sustain for a while. These candlestick chart patterns are called as continuation patterns.

  • After extended declines, long white candlesticks can mark a potential turning point or support level.
  • Doji candlestick pattern is a sign of extreme confusion among bulls and bears in the market.
  • A black candle represents a price action with a lower closing price than the prior candle’s close.
  • If you see a spinning top candlestick with shadows of equal lengths after a long incline or decline period for a market, it can sometimes represent a reversal in the trend.
  • A graph represents data by depicting it in rectangular bars of different heights where the…
  • Candle charts are often used by traders to determine the changes in price of the asset based on the past patterns.

Everything else about the pattern is the same; it just looks a little different. When that variation occurs, it’s called a “bullish mat hold.” Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Last but not least, the shooting star is the exact opposite of the hammer.

Candlesticks like this represent a period of indecision from buyers and sellers as there is no clear direction for price. However, an indecision candlestick can also suggest a pause in a price trend before a continuation or the start of a potential reversal. You will also learn about some of the common candlestick chart patterns that traders look for to indicate potential turning points in the market.

It is referred to as a bullish engulfing pattern when it appears at the end of a downtrend, and a bearish engulfing pattern at the conclusion of an uptrend. The harami is a reversal pattern where the second candlestick is entirely contained within the first candlestick and is opposite in color. A related pattern, the harami cross has a second candlestick that is a doji; when the open and close are effectively equal. The Candlestick chart is a powerful tool for technical analysis that can be used to identify potential trading opportunities. It is a visual representation of price action that can be used to identify trends, support and resistance levels, and potential reversal points. By combining the Candlestick chart with other technical indicators, traders can gain a better understanding of the market and make more informed trading decisions.

potential reversal patterns

Engulfing patterns offer a great opportunity to go long while keeping risk defined to a minimum. As you can see in the example below, the prior bearish candle is completely “engulfed” by the demand on the next candle. The open tells us where the stock price opens at the beginning of the minute.

Please ensure you carefully the risk Disclosure Document as prescribed by SEBI/FMC. Are used by those who do day trading, swing trading, active investing and for investing. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Structured Query Language What is Structured Query Language ? Structured Query Language is a programming language used to interact with a database…. Derivatives, securities, and currencies, presenting them as patterns.

Also, it represents a small body—usually close to the value of the day’s low. The Hanging Man is a bearish reversal pattern that can also mark a top or resistance level. Forming after an advance, a Hanging Man signals that selling pressure is starting to increase. The low of the long lower shadow confirms that sellers pushed prices lower during the session. Even though the bulls regained their footing and drove prices higher by the finish, the appearance of selling pressure raises the yellow flag.

The high and low prices are far apart and make very long… Recognizing patterns is a necessary aspect of technical analysis. Traders should make sure that if they have a moment of doubt, they can act on a situation if they have seen it before. In this article, we will cover in-depth the Three Line Strike candlestick pattern….


What you should be trying to identify at this stage is what the dominant, medium term and short term price trends are. Reading a series of candlesticks together is like reading a sentence. If it was a 5M chart, each candlestick would start and end on the hour and then every 5 minutes. If the image above was a 15M chart, each candlestick would start and end on the hour, 15 minutes past the hour, 30 minutes past the hour and 45 minutes past the hour.

To learn more about how to interpret an inverted hammer pattern and shooting star pattern watch the video below. Just like a real candle, a candlestick also has a wick on top and it casts a shadow under the candle. A long white real body visually displays the bulls are in charge. The thin lines above and below the real body are called the shadows .

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