Long wicks or tails in conjunction with a small real body signify a volatile market. The size of a candlestick’s real body along with its wicks or tails can indicate a market’s volatility. These trading decisions could include opening a new trade, closing an existing one, or scaling out of a trade to capture partial profits. Candlestick charts are often used to make investment and trading decisions, or in some cases, used for making adjustments to one’s trading decisions. The never-ending tussle between buyers and sellers helps in constructing the candlestick line over time. Traders most commonly use shorting positions to short stocks within the share market.

A trader would usually only initiate a short position when a market trend has reversed from an uptrend to a downtrend. Entering a position when the market is falling is known as going short. It is important for traders to be direction agnostic, as a trader has the potential to make a profit (or loss) irrespective of whether the market is rising or falling. Read more about candlestick patterns in the forex market. Three black crows signify the continuation of a downtrend. Three white soldiers signify the continuation of an uptrend. They indicate that a trend is likely to continue in a particular direction. These are patterns with three bull candles or three bear candles in a row. Examples of continuation patterns are three white soldiers or three black crows. Candlestick patterns are either continuation patterns or reversal patters. Read more about doji candlestick patterns.Ĭandlestick patterns confirm potential market occurrences in conjunction with individual candles. The difference in these cases is that the candlesticks have small real bodies as opposed to no bodies at all like the doji.

The hammer and inverted hammer are close cousins of the dragonfly doji and gravestone doji respectively.

It indicates that neither the bulls nor bears have had their say and therefore denotes a situation of uncertainty with respect to market trend. Both top and bottom wicks are long and of approximately equal length.

The long-legged doji is shaped in the form of a cross.

The large top wick represents rejection of a higher price in favour of a lower price and can therefore denote bearish sentiment. It has a long wick on top and no real body.

The gravestone doji is like an inverted dragonfly doji.

The large bottom wick is evidence of rejection of a lower price in favour of a higher price, and therefore can denote bullish market sentiment.

The dragonfly doji has no real body with a long wick to the bottom.

Stock candlesticks explained