In order to create a candlestick chart, you must have a data set that contains open, high, low and close values for each time period you want to display.
|Hollow candlesticks, where the close is greater than the open, indicate buying pressure. |
Filled candlesticks, where the close is less than the open, indicate selling pressure.
|Long white candlesticks show strong buying pressure. The longer the white candlestick is, the further the close is above the open. This indicates that prices advanced significantly from open to close and buyers were aggressive. While long white candlesticks are generally bullish, much depends on their position within the broader technical picture. After extended declines, long white candlesticks can mark a potential turning point or support level. If buying gets too aggressive after a long advance, it can lead to excessive bullishness.Long black candlesticks show strong selling pressure. The longer the black candlestick is, the further the close is below the open. This indicates that prices declined significantly from the open and sellers were aggressive. After a long advance, a long black candlestick can foreshadow a turning point or mark a future resistance level. After a long decline, a long black candlestick can indicate panic or capitulation.|
|Upper shadows represent the session high and lower shadows the session low. Candlesticks with short shadows indicate that most of the trading action was confined near the open and close. Candlesticks with long shadows show that prices extended well past the open and close. Candlesticks with a longer upper shadow and shorter lower shadow indicate that buyers dominated during the session, bidding prices higher, but sellers ultimately forced prices down from their highs. This contrast of strong high and weak close resulted in a long upper shadow. Conversely, candlesticks with longer lower shadow and shorter upper shadow indicates that sellers dominated during the session and drove prices lower. However, buyers later resurfaced to bid prices higher by the end of the session; the strong close created a long lower shadow.|
|Candlesticks with a long upper shadow, long lower shadow, and small real body are called spinning tops. One long shadow represents a reversal of sorts; spinning tops represent indecision. The small real body (whether hollow or filled) shows little movement from open to close, and the shadows indicate that both bulls and bears were active during the session. Even though the session opened and closed with little change, prices moved significantly higher and lower in the meantime. Neither buyers nor sellers could gain the upper hand and the result was a standoff. After a long advance or long white candlestick, a spinning top indicates weakness among the bulls and a potential change or interruption in trend. After a long decline or long black candlestick, a spinning top indicates weakness among the bears and a potential change or interruption in trend.|
|Doji represent an important type of candlestick, providing information both on their own and as components of a number of important patterns. Doji form when a security’s open and close are virtually equal. The length of the upper and lower shadows can vary, with the resulting candlestick looking like a cross, inverted cross or plus sign. Alone, doji are neutral patterns. Any bullish or bearish bias is based on preceding price action and future confirmation. The word “doji” refers to both the singular and plural form.Ideally, but not necessarily, the open and close should be equal. While a doji with an equal open and close would be considered more robust, it is more important to capture the essence of the candlestick. Doji convey a sense of indecision or tug-of-war between buyers and sellers. Prices move above and below the opening level during the session, but close at or near the opening level. The result is a standoff. Neither bulls nor bears were able to gain control and a turning point could be developing.Different securities have different criteria for determining the robustness of a doji. A $20 stock could form a doji with a 1/8 point difference between open and close, while a $200 stock might form one with a 1 1/4 point difference.|
- Introduction to Candlesticks. (n.d.). Retrieved August 17, 2021, from https://school.stockcharts.com/doku.php?id=chart_analysis:introduction_to_candlesticks