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Cn How to read candle body and shadow


What does length and color of candle body signify?

Candlestick Chart Interpretation.

The strength of candlestick chart comes from its visualization of market flow at a glance.
If you can read the series of market movement, you can be able to predict the change in trend and the upcoming market behavior.

Candlestick body color.

The body of candlestick is colored hollow/white/green/blue if its close price is higher than open price. On the other hand, if the close price is lower than open price, the candle’s body is colored black or red. Just looking at the color of the daily candle, you can understand the price flow and the commotion between the buyers and sellers trying to overtake the market. If the dollar rate is in the uptrend, should you buy the dollar? Or should you buy it later, because it’s rising high? If the trend is upward, you must have buying strategy, because the trend is mostly likely to continue until it loses momentum. A recently produced trend tends to continue its upward movement, so it is not recommended to wait until its downfall; if you see a series of uptrend, you should buy aggressively. It is not always correct to do this, so it’s safe to test in a demo account.

Length of Candlestick body

In order to analyze the chart, you should pay attention to its body length. The body of a candlestick is long if the difference between open and close price is huge, and it is short if the difference is small. The difference in length between open and close price signifies the robustness of competition between buyers and sellers trying to win the market.

For the correct interpretation, it is suggested to practice the reading and predicting the trend in a demo account, because it’s much easier to understand and get used to the characteristics of each candlestick patterns in a live market.

Long body of the candle indicates active and strong buy or sell pressure lead by strong market demand. Short body of the candle indicates passive and negative market activity. The long candle in green shown on the left displays strong bullish buying pressure and the closing price is higher than opening price. The short candle in red shown on the right displays strong bearish selling pressure and the closing price is lower than opening price. Generally, bullish candle is drawn with hollow/white/green/blue and bearish candle with black/red.

How to read candle shadow

The upper and lower shadow signify the session’s high and low. A short shadow indicates that the trading action was around the open or close. A long shadow means bigger fluctuation from open and close price. A particular candlestick pattern called “hanging man” or “hammer” is formed when the open, close and high are about the same price. It is a warning sign of a potential reversal downward and is considered as a bearish sign.

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