Candlestic chart pattern

What to look for trading in chart

 A candlestick chart displays the price movement of an asset over a specific period, using candle-shaped visual representations to interpret the data.

Candlesticks are used in technical analysis and can help traders to accurately predict market movements. They will look at the shape and color of candlesticks to get a sense of trends and patterns in a given market.

As I looked at more and more charts and witnessed the dynamism of the market, it became clear to me that it was a matter of understanding what these price actions meant.

 The information that is conveyed in the candlestick would reflect that accordingly.

We can largely categorize candlestick patterns into (1) Filled candle, (2) Unfilled candle. Now that we’ve covered the candlestick basics, let’s get into some of the easier-to-digest patterns.

How to read candlesticks

You read a candlestick by looking at its color, body and wicks. Knowing how to read candlestick charts can help you to identify or predict market movements.

Color of the candlestick

The color of a candlestick is used to indicate the way in which a market has previously moved or is currently moving. From the above example, you can see that the chart will be green if the close price is higher than the open price, and will be red if the close price is lower than the open price. As such, the color of a candlestick is a good indicator of whether a market was bullish or bearish during the given period.

Sometimes, you may find that the candlesticks on a graph are filled and not filled, rather than being green and red. An unfilled or white candlestick is the same as a green candlestick, and a filled or black candlestick is the same as a red candlestick.

Body of the candlestick

The body of a candlestick is used to show the difference between an asset’s open and close price (or the current price for the candlestick on the far right). If the candlestick is green, then the bottom of the body represents the opening price and the top represents the closing price. If the candlestick is red, then the opposite is true, and the top represents the opening price and the bottom represents the closing price.

Equally, if the body of the candlestick is long then there has been a period of intense buying and selling. If the body of the candlestick is short, then there has been more of a consolidation in the market for that period.

Wick of the candlestick

The wick or ‘shadow’ of the candlestick shows the highest and lowest prices reached by an asset in the given time period. The top wick, also known as the upper shadow, is the highest price. The bottom wick, or lower shadow, is the lowest price.

A candlestick with a long upper wick and short lower wick shows that buyers were very active during a trading period. However, sellers soon forced prices to fall from their highs, causing the markets to close lower than the level which the upper wick reached. The weak closing price created the long upper shadow.

Conversely, a candlestick with a long lower wick and short upper wick shows us that sellers drove prices lower initially, but then buyers bought cheap and caused prices to recover, with the markets finishing strongly as evidenced by the long lower shadow.

How to use candlesticks when trading

Now, based on above information we divide candles in two categories:

1.Filled order candle: A candle that has body size greater than 70% of its total size, called as filled order candle. The color may be green or red of filled order candle.

2.Unfilled order candle: A candle that has wick size greater than 50% of its total size of candle, called as unfilled order candle.The color may be green or red of filled order candle.

Unfilled order candle contain pending orders of professional traders and public orders, and filled order candle length decides targets for order.