Candlestick chart patterns are very popular in forex trading because they are the main part of technical analysis. On all chart modules, users can toggle between line, bar and candlestick chart view. The candle consists of two parts: the body and the shadows. The body reflects the open and closing price for the certain period. The candle body is black if the close price below the open, and white if the close was higher than the open for the period. The candlestick shadow reflects the intra-period high and low prices. (Note: In candlestick charting the following periods are often used; 5 min, 15 min, 1 hour, daily and weekly). Long shadows, show that the trading extended well beyond the opening and/or closing price, while short shadows, show that trading was confined closely to the open and/or closing price. Long and Short Bodies 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. Even more potent long candlesticks are the Marubozu: Black and White. These candlesticks do not have upper or lower shadows and the high and low are represented by the open or close. Long and Short Shadows 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. Candlestick with long shadows show that traded extended well past the open and close. Candlesticks with a long upper shadow and short lower shadow indicate the following: buyers dominated during the session, and bid prices higher. However, sellers later forced prices down from their highs, and the weak close created a long upper shadow. Conversely, candlesticks with long lower shadows and short upper shadows indicate the following: sellers dominated during the session and drove prices lower. However, buyers later resurfaced to bid prices higher by the end of the session and the strong close created a long lower shadow. Other type of Candlesticks are with a long upper shadow, long lower shadow and small real body. They 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 price, 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. 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. BAR CHART: A type of trading chart consisting of four significant points: the high (1) and the low (2) prices, which form the vertical bar; the opening (3) price, which is marked with a little horizontal line to the left of the bar; and the closing (4) price, which is marked with a little horizontal line to the right of the bar.
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