Basic Composition of Candlestick
Opening Price: The initial transaction price of the trading day.
Closing Price: The last transaction price of the trading day.
Highest Price: The highest transaction price during the trading day.
Lowest Price: The lowest transaction price during the trading day.
A candlestick usually consists of three parts:
Upper Shadow: Located above the candlestick, representing the price range between the highest price and the closing price (or opening price, depending on the candlestick's color).
Body: Represents the price range between the opening price and the closing price. A bullish candle (red or white) indicates that the closing price is higher than the opening price, while a bearish candle (green or black) indicates that the closing price is lower than the opening price.
Lower Shadow: Located below the candlestick, representing the price range between the lowest price and the opening price (or closing price, depending on the candlestick's color).
Interpretation Methods of Candlesticks
Interpretation of a Single Candlestick
Bullish and Bearish Candles: A bullish candle indicates that the market is rising during that period, while a bearish candle indicates a decline.
Body Size: The longer the body, the stronger the market's attack. A longer bullish body indicates sufficient upward momentum; a longer bearish body indicates greater downward momentum.
Shadow Length: The longer the shadow, the stronger the market's resistance or support in that direction. A longer upper shadow indicates greater resistance to upward movement; a longer lower shadow indicates stronger support.
Interpretation of Candlestick Combinations
Double Bottom and Double Top: A double bottom (W bottom) signals a transition from a downtrend to an uptrend; a double top (M top) signals a transition from an uptrend to a downtrend.
Head and Shoulders Bottom and Head and Shoulders Top: A head and shoulders bottom indicates a market reversal to the upside, while a head and shoulders top indicates a market reversal to the downside.
Pregnant Line: A pregnant line usually indicates that a market reversal may soon occur.
Doji: A doji indicates that the opening price and closing price are the same during that period, showing a balance of power between bulls and bears. Appearing at a high may indicate a peak, while appearing at a low may indicate a bottom.
Three Soldiers and Three Black Crows: Three soldiers consist of three consecutive bullish candles, indicating a strong upward market; three black crows consist of three consecutive bearish candles, indicating a weak downward market. However, note that three black crows during an upward trend may represent accumulation of strength by bulls.
Combining Position and Volume
Position: The position of the candlestick is crucial for determining its nature. For example, a long upper shadow appearing early in an uptrend may indicate a test by major players, while a long upper shadow appearing late in an uptrend may signal a peak.
Volume: Trading volume is an important indicator for determining market trends. In candlestick charts, trading volume is usually analyzed in conjunction with the size or color of the candlestick body. For example, a bullish candle with increased volume usually indicates sufficient upward momentum; a bearish candle with increased volume may indicate strong downward momentum.
Basic Composition of Candlestick Opening Price: The initial transaction price of the trading day. Closing Price: The last transaction price of the trading day. Highest Price: The highest transaction price during the trading day. Lowest Price: The lowest transaction price during the trading day. A candlestick usually consists of three parts: Upper Shadow: Located above the candlestick, representing the price range between the highest price and the closing price (or opening price, depending on the candlestick's color). Body: Represents the price range between the opening price and the closing price. A bullish candle (red or white) indicates that the closing price is higher than the opening price, while a bearish candle (green or black) indicates that the closing price is lower than the opening price. Lower Shadow: Located below the candlestick, representing the price range between the lowest price and the opening price (or closing price, depending on the candlestick's color).
Interpretation Methods of Candlesticks Interpretation of a Single Candlestick Bullish and Bearish Candles: A bullish candle indicates that the market is rising during that period, while a bearish candle indicates a decline. Body Size: The longer the body, the stronger the market's attack. A longer bullish body indicates sufficient upward momentum; a longer bearish body indicates greater downward momentum. Shadow Length: The longer the shadow, the stronger the market's resistance or support in that direction. A longer upper shadow indicates greater resistance to upward movement; a longer lower shadow indicates stronger support. Interpretation of Candlestick Combinations Double Bottom and Double Top: A double bottom (W bottom) signals a transition from a downtrend to an uptrend; a double top (M top) signals a transition from an uptrend to a downtrend. Head and Shoulders Bottom and Head and Shoulders Top: A head and shoulders bottom indicates a market reversal to the upside, while a head and shoulders top indicates a market reversal to the downside. Pregnant Line: A pregnant line usually indicates that a market reversal may soon occur. Doji: A doji indicates that the opening price and closing price are the same during that period, showing a balance of power between bulls and bears. Appearing at a high may indicate a peak, while appearing at a low may indicate a bottom. Three Soldiers and Three Black Crows: Three soldiers consist of three consecutive bullish candles, indicating a strong upward market; three black crows consist of three consecutive bearish candles, indicating a weak downward market. However, note that three black crows during an upward trend may represent accumulation of strength by bulls. Combining Position and Volume Position: The position of the candlestick is crucial for determining its nature. For example, a long upper shadow appearing early in an uptrend may indicate a test by major players, while a long upper shadow appearing late in an uptrend may signal a peak. Volume: Trading volume is an important indicator for determining market trends. In candlestick charts, trading volume is usually analyzed in conjunction with the size or color of the candlestick body. For example, a bullish candle with increased volume usually indicates sufficient upward momentum; a bearish candle with increased volume may indicate strong downward momentum.
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