Candlesticks – A different perspective

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Candlesticks – A different perspective

Financial Freedom is not FREE by MATUOG

Candlesticks or Candlesticks chart is one of the popular ways of plotting price of an instrument like stock/future/commodity against time. They were developed by the Japanese and popularized around the world by Mr. Steve Nison. Let us understand how candles are plotted and how they are interpreted. Most experts of candlesticks have always professed the idea of candlesticks depicting the emotions of traders in the market, however, we that in reality, it is the institutions with their huge order flow that control prices, not emotions of traders, therefore we would look at candlesticks only from the prism of institutional activity.

Anatomy of Candlesticks

  • The portion between the Open and the Close is called Body of the candle
  • The thin lines above and below the body are called wicks of the candle

Interpretation of Candlesticks

Momentum candles

  • They are large candles that have small wicks and large body
  • They signify clear domination or winning of one side, that is, buyers or seller in that time period

Equal fight candles

  • They have a small body and may or may not have large wicks
  • They indicate that buyers and sellers have fought with equal strength and there was no clear winner
  • The color of the body is irrelevant
  • They could be referred to as Pause candles since more often they appear after a rally or fall in price pausing the previous flow in price action

Change of control

  • Bearish Momentum candle followed by Pause candle followed by Bullish Momentum candle indicates the change of control or domination from sellers to buyers
  • Initially, Sellers were in control then buyers fought back with equal force creating the Pause candle then buyers piled in more buy orders to defeat the seller who was handsomely defeated creating the bullish momentum control
  • This indicates Buying institution defeating Selling Institution to take control of price

A long fight

  • A series of Pause candles indicates continued fighting buy buyers and seller in equal power so that no one emerged victorious, so the price could barely move in any clear direction

Clear winner

  • This shows clear domination by sellers
  • Sellers are in control and are able to push down price strongly
  • This could be due to either heavy piling for sell orders or due lack of buy orders giving a free pass to sellers

As we can see that candlesticks are a great way of visually representing how institutions are controlling the price of an instrument. When we start viewing candlestick charts from that perspective, a great deal of opportunities opens up!

You can check out our video presentation on this concept here: https://www.youtube.com/watch?v=E3ivdpLHmsQ

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  • a.g.tradersworld@gmail.com
A.G. Traders is a group of passionate professional traders trading across Stocks, Futures, Options and ETFs. We believe that trading the financial markets is a serious business and not for casual enthusiasts. Our cardinal pillars are Knowledge, Strategy, Risk Management and Right Psychology for long term success in the markets.
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A.G. Traders is a group of passionate professional traders trading across Stocks, Futures, Options and ETFs. We believe that trading the financial markets is a serious business and not for casual enthusiasts. Our cardinal pillars are Knowledge, Strategy, Risk Management and Right Psychology for long term success in the markets.
  • https://www.youtube.com/channel/UCBSwknutI2cyXAisOXCq4Fg
  • a.g.tradersworld@gmail.com
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