Education

The real body is the price range between the period's open and close. This is drawn as the widest part of the candlestick chart. The real body is either white or black, signifying buying or selling dominance after the open. (Of course, with some of today’s analytical software, you can choose any colors you wish.) The contrasting shading (white or black) helps traders perceive changes in the balance of market forces between buying (white) or selling (black) dominance.

White candlestick: If the close is higher than the open, the real body is white. A white candlestick indicates buying dominance after the open.

Black candlestick: If the close is lower than the open, the real body is filled in black. A blackcandlestick indicates selling dominance after the open.

The real body is the most important part of each candlestick. The shade (white or black) and length of the real body reveals whether the bulls or bears are dominant during the main period of trading. A long white real body implies that the bulls are in charge. A long black real body implies that the bears are in charge. Candlesticks with very small real bodies, where the difference between the open and close are relatively tiny compared to normal trading ranges, imply that neither side is currently in charge and, furthermore, that the previous trend may be worn out.

Shadows are the part of the price range that lies outside the real body’s open-to-close price range. Shadows are represented as thin lines extending from the real body to the extreme high and low prices for the period, above and below the real body.  The peak of the “upper shadow” is the high of the period, while the bottom of the “lower shadow“ is the low of the period.

The length and position of the shadows are meaningful. A tall upper shadow implies that the market rejected higher prices and is heading lower. A long lower shadow implies that the market rejected lower prices and is heading higher. Very long shadows, both upper and lower, indicate that the market has lost its sense of direction. Putting several of these together points to a trend reversal.  

Indecision