Do you know the inside of the candle?
#charting #technicalanalysis #ta #eth #btc
A typical candle will have an Open, High, Low, Close. You will see these referred to in some text, articles and indicators as O,H,L,C
Below is the structure of both a Bullish (Green) & Bearish (Red) Candle.
The cycle shown below, is the action within a candle, think about this – the candle opens at say 100, it dips to 95 and starts gaining ground to 120, before dropping a little to 115 and closing there.
Why is this important?
Think of it like a football (soccer) match – the game starts and plays out during a set time, much like the candle – and at the end we have a score. The actions in the match tell the story, but it’s the end result that counts.
So, what is the story?
The middle of the candle known as the body is equal to the spread and gives a clue as to the sentiment of this particular candle.
Sentiment
A wide spread gives the indication of strong sentiment, of course if the candle is red with a long body it would be strong bearish sentiment.
If the body is narrow – it suggests a weak bias overall.
Do the wicks matter? – well yes, of course. They tell another story, the wick can give you the equivalent of the match highlights – how much time/effort was committed in the oppositions half. If you think of it still as a sports match.
Although the body (spread) is small this image shows a different type of strength, well actually it is more weakness to the upside than downside strength. The market has tried to push higher and failed.
Wicks in some more detail:
Inside the wick you can see effort with lack of reward. Shown in the image above, this can be exaggerated and emphasised if accompanied by a small body or spread. Especially in the other direction. By this I mean a large wick on the top and then the bar closing red would have emphasis on bearish sentiment – however, a small red body would show little buying interest but no real intent to the downside.
The candles can tell a story, often on their own. However various formations give more detail and can be used to identify events prior to a major move.
This is especially powerful when used with some other methods, that can zone in on areas of interest.
Did you know?
Inside @TradingView indicator tab; there is a sub section for candlestick patterns – to automate the recognition.
This feature has several scripts for Doji, Engulfing, Hammers, Spinning tops and many more.
This was only a quick dive into candlesticks – nothing major and not much depth, but as usual, I hope this helps even with the appreciation of what a candle represents.
Some additional educational posts:
https://www.tradingview.com/chart/EURJPY/76KSElbz-Volume-Profiles-on-TradingView/
If you are new to @TradingView
Or a new trader, there is a pretty useful feature called volume profiles - available with paid membership of Tradingview. This is a quick introduction to and not a full lesson on how to use, strategies or techniques (will post one if there is interest for that).
TradingView's own definition of Volume profile
Volume Profile is an advanced charting study that displays trading activity over a specified time period at specified price levels. The study (accounting for user defined parameters such as number of rows and time period) plots a histogram on the chart meant to reveal dominant and/or significant price levels based on volume. Essentially, Volume Profile takes the total volume traded at a specific price level during the specified time period and divides the total volume into either buy volume or sell volume and then makes that information easily visible to the trader.
Source - www.tradingview.com/...2040-volume-profile/
