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Chapter 9, Part II. How to interpret different candlesticks? Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    And here how it looks like on real charts:

    #1 4-Hour AUD/USD

    Pipruit: Well, Sir, does this kind of analysis make sense for bar charts? I’ve just thought, although they look a bit different, bar chart shows the same information as candle one, doesn’t it?
    Commander in Pips: Of course, you’re absolutely right. This approach is absolutely suitable for bar charts as well. The major reason why it usually applies with candlesticks is because it’s much easier to see with candles – this is just more comfortable. Here it is – take a look by yourself:

    #2 the same AUD/USD chart but now with bars

    See – the candle chart is much more evident than the bar one. Because candles are thicker then bars and colored – this makes them more comfortable for analysis and perception. But both of them – as bar chart, as candle could be used, because they carry the same information.

    Pipruit: I see thanks. But now I have a question about the shadows…Speaking definitely – couple of questions.

    1. Is it important the difference in length between upper and lower shadows?

    2. How important the length of shadows itself?​

    Commander in Pips: Ok, first of all I have to remind you that shadows carry very important information. The top of upper shadow shows the highest price of trading period, while the bottom of lower shadow – lowest price of trading period.

    So, let’s clarify, what means the differences between shadows? Let’s take a look at next candles, what is different and what is common for them?


    Pipruit: Well, common for them is that they have a closing price near the top. Difference is that the right candle has a close price right near the high, while left candle a bit lower than the high price.​

    Commander in Pips: Excellent, but can you tell me the same, but in terms of shadows…

    Pipruit: Ok, I’ll try. Both of them have a long lower shadows, but right has very shallow up shadow, while the left candle has a more normal upper shadow, although it still shorter than the lower one.​

    Commander in Pips: Great. Now imagine the price action that has happened as these candles were forming… What do long lower shadows mean?
    #1 Sive Morten, Dec 15, 2013
    Lasted edited by : Feb 15, 2016
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