Anatomy of a Candlestick

1. The Body:

• The body represents the range between the opening and closing prices for a given timeframe (e.g., daily, weekly). On TradingView, selecting a daily timeframe will show each candlestick representing one day of market action.
• Bullish Candlesticks: If the close is above the open, the candlestick body is typically green (bullish), showing upward movement.
• Bearish Candlesticks: If the close is below the open, the body is red (bearish), indicating downward movement.

2. The Wicks:

• Wicks (or shadows) show the highest and lowest points the price reached within that timeframe. Think of them as a “trail” of where price has been, reflecting any intra-period movements above or below the opening and closing prices.
• Long wicks can signal indecision, especially when paired with a small body, as they indicate price was tested in both directions.

  

Decoding Candlestick Patterns

When interpreting candlesticks, context is everything. Here are some classic patterns and what they tell us about market psychology:

1. Indecision Candlestick (Doji):

• A candlestick with a small body and long wicks on both sides is often a Doji, signaling indecision. Price was tested both higher and lower but closed around the opening level, indicating a “draw” between buyers and sellers.
• Following a Doji, watch for the next candlestick as it can signal a potential shift in market control.

2. Strong Bullish or Bearish Candlesticks:

• A strong, full-bodied candlestick with minimal or no wicks shows clear market control. For a bullish candle, price opened at one level, rose steadily, and closed at the high, indicating conviction among buyers. A strong bearish candle shows a similar conviction among sellers.
• These candles are often seen after consolidation and indicate that the market has chosen a direction.

3. Shooting Star and Hammer Candlesticks:

• Shooting Star: Formed after an upward move, this candlestick has a long upper wick and a small body at the bottom. At one point, the ca

Our Top Picks:

DOGWIFHAT

120,650%

SPX6900

17,000%

POPCAT

66,567%

PENDLE

5,002%

SOLANA

2,500%

HYPE

1,740%

Don’t miss our next 100X

Trusted by 230K+ investors

Get started

ndle was fully bullish, but sellers pushed price back down near the open, signaling a potential reversal.

Hammer: The inverse of a Shooting Star, the Hammer has a long lower wick and a small body at the top, indicating buyers took control after sellers initially dominated. Often found at market bottoms, it shows a reversal in sentiment as buyers “hammer” the price back up.

 

Real-World Examples and Psychology

Let’s break down some real candlestick examples to put this knowledge into action.

1. Bullish Momentum: After a period of consolidation, a strong bullish candlestick with no wicks signals clear buyer dominance. This type of candlestick shows that buyers were in control for the entire timeframe, without interference from sellers. It’s an indication that price is likely to continue upward if no resistance is met.

1. Bearish Reversal at Resistance: If a Shooting Star forms near a resistance level, it suggests that buyers attempted to push higher but couldn’t maintain control. Sellers took over, pushing price down by the close, which may signal a reversal or the beginning of a downtrend.

1. Hammer at Support: A Hammer candlestick near a support level shows that while sellers initially pushed price down, buyers stepped in and closed it higher, defending the support. This candlestick often signals the end of a downtrend, especially when accompanied by strong volume.
2. Trend Continuation: When multiple strong candlesticks print in the same direction, it indicates trend continuation. For instance, a series of strong bullish candles on the daily timeframe shows sustained buyer interest and the potential for further upside.

Importance of Context and Market Psychology

Candlesticks tell a story of buyers and sellers battling it out, but context is crucial. For example, an indecisive Doji at the end of an uptrend may signal a reversal, whereas the same Doji within consolidation might mean the market is undecided. Align candlestick patterns with all other factors to build your conviction, conext is king

1. Applying Context: Look for candlestick patterns around key levels like support and resistance, as these are where sentiment shifts are most likely.
2. Psychological Insight: Understanding that each candlestick represents the psychology of the market gives you an edge. Knowing whether buyers or sellers are in control helps shape your trading decisions.

---

Cryptonary’s Take

Mastering candlestick anatomy and understanding the psychology behind each pattern is essential for reading the market effectively. Rather than just identifying patterns, look at what each candlestick says about market participants—who’s winning the battle and at what level. It’s not just about spotting a pattern but understanding the story behind it. With this knowledge, you’ll be able to navigate the market with greater confidence and precision.