Written by Robert McKinley

Candlestick Trading

If you have not read Introduction To Japanese Candlesticks yet, you should do so here before you continue with this lesson.

Candlestick Bodies

• The length of a candlestick body tells us the strength or weakness of the buying or selling pressure of a currency during the time frame represented by the candlestick body.
• Long bodies tell us that there is strong buying or selling happening. The longer the body, the more buying or selling pressure.
• Short bodies tell that there is not much buying or selling activity. The shorter the body, the weaker the buying or selling pressure.

• 1. Remember from Introduction to Japanese Candlesticks that if you see a white body it means the closing price is above the opening price. So if we see a long white body it tells us that there is strong buying pressure. The longer it is; the further is the closing price above the opening price. It also tells us prices have increased significantly from the open to the close and that the buyers were aggressive.
  2. Also remember that if you see a filled-in (usually black) body it means that the closing price is below the opening price. So if we see a long black body it tells us that there is strong selling pressure. The longer it is; the further is the closing price below the opening price. It also tells us prices have decreased significantly from the open to the close and that the sellers were aggressive.

There is more information in the “Shadows”

• Upper shadows indicate the session high.
• Lower shadows indicate the session low.
• Long shadows tell us that the trading activity occurred well past the open and the close.
• Short shadows tell us that most of the trading activity occurred near the open and the close.

• A candlestick with a long upper shadow and a short lower shadow tells us that while buyers bid prices higher, sellers drove prices back down to near the open price.
• Conversely, a candlestick with a long lower shadow and a short upper shadow tells us that while sellers drove the price lower, buyers pushed prices back up to near the open price.

The next lesson is Candlestick Patterns.