Basic Candlestick Formation

Question 1

Three types of candle

Answer 1

Question 2

The Long candle

Answer 2

A long candle is defined as one where the open and close (real body) are far apart. It has a greater than average price range. Long candles can be white (bullish) or black (bearish) as shown in the previous diagrams.
A long candle reflects a day with a larger price movement. A long white candle is generally interpreted as a very bullish day and a long black candle is interpreted as a very bearish day

Question 3

Short Candle

Answer 3

A short candle is defined as one where the difference between the open and close (real body) is small. It may or may not have shadows. When there are shadows, their short upper and/or lower shadows have a less than average price range. A short candle reflects a day of narrow price movement. It is generally viewed as an insignificant candle and is indicative of a consolidation or
indecisive market. Relatively small volumes accompany their occurrence. Short candles can be either white or black as shown in the preceding diagrams

Question 4

Short candle exception

Answer 4

Exception to the rule: A short candle is normally viewed
as an insignificant candle because of its small real body, short shadows, small volume, and a less than average price range. But the exception to this rule is when short candles are a part of an umbrella group (i.e., the Hammer, Hangman, Inverted Hammer, and Shooting Star) or when they have very long upper and lower shadows (called high wave Spinning Tops or doji). If these candles of the umbrella group or high wave Spinning Tops or doji are spotted at the top or bottom of a market trend, they are signals of a market top or bottom. In such a situation the location of these candles will be a more significant factor than their small size.

Question 5

four price doji

Answer 5

■ Definition: The Four Price doji is formed when the open,
high, low, and close are all at the same price.
■ General interpretation: Like all doji, the Four Price
doji can be interpreted both as a reversal or a continuation pattern. The important criterion is to identify where the doji is found. If the doji is found after a rally or at a high price area, it is generally viewed as a potential bearish reversal pattern. If it is found after a downtrend or at a low price area, it has potential bullish reversal implications.
But if found in a sideways market, it is viewed as a neutral
candle.

Question 6

gravestone doji

Answer 6

■ Definition: The gravestone doji is formed when the open, close, and low are at the same price. It has a long upper shadow.
■ General interpretation: Like all doji, the gravestone doji
can be interpreted both as a reversal or a continuation pattern. The important criterion is to identify where the doji is found. If the doji is found after a rally or in a high price area, it is generally viewed as a potential bearish reversal pattern. If it is found after a downtrend or at a low price area, it has potential bullish reversal implications. But if found in a sideways market, it is viewed as neutral.