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Chapter 9, Part II. How to interpret different candlesticks? Page 3

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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    Pipruit: I suppose during this period sellers push prices down, but later buyers struggle sellers back and has returned their positions. We can see that by the position of the close price – it near the high.​

    Commander in Pips: You are absolutely right. In the beginning of this period that is indicated by this candle, bears (i.e. sellers) were stronger – they could move prices till the level of lower shadow that shows the lowest price of trading period. But then due to some reasons (for example, macro data release), bulls have come in play and force bears back till the end of trading period. As a result the close price is very close to the high on the right candle.

    Speaking about left candle, we can see that it’s not so “bullish” compared to the other one, because it has a close price not so near the high. It means that although bulls were able to return their positions from the lowest price and have driven price up again – the bears power increases closer to the end of the trading period and they were able partially push the bulls lower. On the example of this candle you can understand why candles with close price near the open one and equal shadows are named as “indecision”. Because bulls return back from lowest price and drive right to the highs, but then bears were a bit stronger and returned price back again. So, as a result – almost parity – shadows have almost equal length and close price is very near the open one.

    By the way, if our left candle has a bit lower close price we also can call it like that.

    Pipruit: That’s fine; I understand the answer about the first question. But how we should understand the different length of shadows?​

    Commander in Pips: Well, the candle with long shadows tells us, that the solid part of trading action was beyond the close and open price, while the candle with short shadows shows that the major action was inside open-close price range.
    #1 Sive Morten, Dec 15, 2013
    Lasted edited by : Feb 15, 2016
    Hamza Samiullah and fran alvarez like this.
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