Let’s talk about
candlesticks, starting at the beginning so everyone comes up to speed at the same time. I’ll be brief because most people know what candle charts are. Figure shows two examples of
candlesticks. The line (a single price bar) on the left is a white candle. This one shows the relative positions of the
open,
high,
low, and
close. Notice that the closing price is higher than the
opening price.
When that occurs, the
body is white. On the right, the
candle is black because
price closed below the open. The upper shadow is hair growing from the top of the candle, and the lower shadow is a single leg dangling from the bottom of the candle. It may help to think of shadows as wicks.
Candles don’t need either an upper or a lower shadow. They don’t need a body, either (
such as when the open and close are the same). The key concept to remember is that a black candle shows a close below the open and a white candle shows a close above the open. A black candle does not show price closing lower than the previous day, nor does a white candle show a higher close than the day before.
With this
candle definition, you can have a stream of white candles in a declining
price trend, and black candles forming a rising
price trend. I’ve seen both situations, too. That’s all there is to candle configuration.
Multiple candle lines along with variations in shadow and body length make up the many candle patterns.
