Introduction

Given the requirement for information on four prices, OHLC, in order to construct a candle, the resulting candle shapes can take on a variety of forms. The body may be very long or very short, and similarly for shadows. However, either the body or the shadows may sometimes not appear at all. This multitude of combinations allows a grouping the candles based on their appearance, enabling them to be interpreted. All the individual candles are called basic candles. Most of them are not patterns as such, but they can often play an important role in the assessment of the current situation of the market and its possible further development. Basic candles are components of more complex patterns which can contain two, three or even more basic candles.

Every single candlestick on the chart is classified as one and only one particular basic candle. We can look at basic candles as building blocks, from which patterns are composed. Having the accurate way of defining basic candles helps to define patterns being precise and avoiding ambiguity. Basic candles are not patterns per se.

There are four groups of basic candles:

  • Candles, that is candles that have two shadows shorter than the body.
  • Marubozu candles, that is candles that do not have at least one shadow; additionally the shadow, if present, cannot be longer than the body.
  • Spinning top candles, that is candles with different opening and closing prices and having at least one shadow, where at least one shadow has to be longer than the body.
  • Doji candles, that is candles that do not have a body; in other words the open price is equal to the close price.

Comments are closed.