Forex Charts Book. Series of Free Forex ebooks

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The size of the candlestick, the length of its shadows, positioning on the chart gives a trader clues about market behavior.

The size of the candlestick tells how strong buying or selling pressure is.

A long big candlestick symbols of a strong market pressure (buying or selling), whereas a small size candlestick means that buyers and sellers are in consolidation and buying/selling pressure is weak.

Shadows (tails) of the candlestick reveal activity of buyers and sellers. The upper shadow shows activity of buyers towards pushing the price up. The lower shadow represents sellers' activity towards pulling the price down.

Long shadows occur during high activity coming from both sides — sellers and buyers — as they try to turn the price into their direction.

A small upper shadow plus a big lower shadow tells a trader that in the beginning sellers were dominant and forced the price down, but fell under the pressure of buyers at the end of the trading session.

A big upper shadow plus a small lower one indicates that at first buyers took over the trade and pushed the price up, but eventually forced to give up facing strong sellers' pressure.

A candlestick with no shadows indicated that buyers (in case of a green candle) or sellers (red candle) were dominant during the whole trading session.

A candlestick that posses a small or no body and at the same time has small shadows indicates indecisiveness between buyers and sellers and a very little trading — a weak, slow trading market.

Now it is time to introduce different candlestick formations that traders closely watch for while analyzing a chart. Continue...

To your trading success!
Jeff Boyd

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Forex Charts Book. Series of Free Forex ebooks

Educational guide for beginners on exploring Forex charts

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