Candlesticks charting...

[narayan07]

Hi,

In candlesticks we have two major candles -

Bullish - When the close was above the open.
Bearish- When the close was below the open.

While reading the charts I kind of saw something and wanted to know how to interpret it..

When the stock is in uptrend and
On Day1 - it closes above the day's open so its Bullish
On Day2 - it closes above yesterday's close but lower than open so to me this seems to be bullish and not bearish

Same could happen in downtrend...

I am concerned about the Day2 price movement.. and would appreciate suggesstions from senior traders...

Cheers...!

 

[Trader333]

In my view it is not possible to take just two in isolation and draw any conclusions. There are also many members who take the view that nothing of any use can be determined from candlesticks at all. To make any possible sense the two candles would need to be seen in context of the whole chart.

 

[timsk]

Hi narayan07,
Welcome to T2W.

My view is that interpreting candlestick formations in isolation is asking for trouble. Context is king - and knowing where in the trend the specific formations you describe occur and whether there are areas of support and resistance nearby - all play their part. Also, the high and low are worth taking into account - not least because the size of candle can be significant. I suggest you post a chart or two with examples and then members can offer their interpretation. In the meantime, I've just added this Sticky which you might find helpful: Essentials Of Technical Analysis
Tim.

 

[Splitlink]

Hi,

In candlesticks we have two major candles -

Bullish - When the close was above the open.
Bearish- When the close was below the open.

While reading the charts I kind of saw something and wanted to know how to interpret it..

When the stock is in uptrend and
On Day1 - it closes above the day's open so its Bullish
On Day2 - it closes above yesterday's close but lower than open so to me this seems to be bullish and not bearish

Same could happen in downtrend...

I am concerned about the Day2 price movement.. and would appreciate suggesstions from senior traders...

Cheers...!

Not the richest senior member on this site but I've got tuppence to spend!

I would say that patterns can only be interpreted in context with something else that helps the trader to judge the direction of any significant move. It's obvious that the direction is the key to trading. The candles and bars provide the timing.

 

[narayan07]

@Trader333..I am not considering them in isolation....in my example I consider the underlying trend is bullish and so if I get a given candle on Day2 then how do I interpret it...like as we have in Hanging man formation...but here say I am considering that its not a HM..then how do we take it.
@Splitlink..I agree that direction is the key to trading. But my question is given the candles in the example as per standard belief its more likely bearish but can't it be considered to be bullish and then we base our decision to buy/sell.
@Timsk...thanks for your comments and the link. I have already read through most of the sticky threads here. What I am trying to understand here is that normally in an uptrend if open is less than close then its bearish sign but I think it ought to be more of a bullish signal. If i plot the same graph based on close of the day in Line and not in candlesticks it will show the trend is bullish ..

 

[malaguti]

@Trader333..I am not considering them in isolation....in my example I consider the underlying trend is bullish and so if I get a given candle on Day2 then how do I interpret it...like as we have in Hanging man formation...but here say I am considering that its not a HM..then how do we take it.
@Splitlink..I agree that direction is the key to trading. But my question is given the candles in the example as per standard belief its more likely bearish but can't it be considered to be bullish and then we base our decision to buy/sell.
@Timsk...thanks for your comments and the link. I have already read through most of the sticky threads here. What I am trying to understand here is that normally in an uptrend if open is less than close then its bearish sign but I think it ought to be more of a bullish signal. If i plot the same graph based on close of the day in Line and not in candlesticks it will show the trend is bullish ..

You might want to re-read Tims excellent post on technical analysis where he states precisely what might consititute a bullish trend, and when that trend may come into question. It had something to do with higher highs and higher lows and had nothing to do with what one candle might be saying about the trend

 

[Splitlink]

@Trader333..I am not considering them in isolation....in my example I consider the underlying trend is bullish and so if I get a given candle on Day2 then how do I interpret it...like as we have in Hanging man formation...but here say I am considering that its not a HM..then how do we take it.
@Splitlink..I agree that direction is the key to trading. But my question is given the candles in the example as per standard belief its more likely bearish but can't it be considered to be bullish and then we base our decision to buy/sell.
@Timsk...thanks for your comments and the link. I have already read through most of the sticky threads here. What I am trying to understand here is that normally in an uptrend if open is less than close then its bearish sign but I think it ought to be more of a bullish signal. If i plot the same graph based on close of the day in Line and not in candlesticks it will show the trend is bullish ..

Candles, by themselves, have never worked for me. OCO orders exist because many do not know, for sure, which way a breakout is going to go.

That is, also, why reversals , or spotting the top/bottom are such a dangerous ploy. Pins, inside bars, are not reliable patterns, on their own, either.

 

[Shakone]

Referring to opening post, thing is... what does it matter? If I tell you it is bullish, so what? If I say bearish, then what? It's not really going to help you either way I'd imagine.

According to you it's in an up trend, so then things are bullish (unless the two candlesticks make you conclude it has changed from being in an uptrend).

 

[narayan07]

Ok..i think I got it...I have been confusing myself with the idea of interpreting the candles without paying attention to the underlying trend.

Well if the trend is bullish and I see a bear candle then it should be a buy opportunity if I am not already in and same goes on the downside for a bull candle relates to sell oppurtunity.

However say if there is a case where the trend is not clear (I use moving averages to identify trends. So if the price is hovering around the MA) then does the example serve any usefulness in picking up the next move.

 

[malaguti]

Ok..i think I got it...I have been confusing myself with the idea of interpreting the candles without paying attention to the underlying trend.

Well if the trend is bullish and I see a bear candle then it should be a buy opportunity if I am not already in and same goes on the downside for a bull candle relates to sell oppurtunity.

However say if there is a case where the trend is not clear (I use moving averages to identify trends. So if the price is hovering around the MA) then does the example serve any usefulness in picking up the next move.

You definitely haven't got it

 

[timsk]

However say if there is a case where the trend is not clear (I use moving averages to identify trends. So if the price is hovering around the MA) then does the example serve any usefulness in picking up the next move.

narayan07,
It might, it might not. It's up to you. The key point linking all the replies you've received thus far is that there are no definitive answers to the types of questions you pose. There's no 'right' or 'wrong' - other than what you define for yourself which will be determined by your trading approach and objectives, along with your views about the markets and how they function.
Tim.

 

[neil]

narayan07,
It might, it might not. It's up to you. The key point linking all the replies you've received thus far is that there are no definitive answers to the types of questions you pose. There's no 'right' or 'wrong' - other than what you define for yourself which will be determined by your trading approach and objectives, along with your views about the markets and how they function.
Tim.

And stop looking for the holy grail. Some trades win, some lose. Your task is to accept losers and manage accordingly-stops etc. Easy for me to write but exceedingly difficult for you (and many others) to master.
Good luck.