Stages of Forming a Candlestick
The formation of a candlestick body is an important process in a trading session. A long body means that there is buying or selling activity in a fairly high volume. The longer the body that is formed, the more buying or selling activity that occurs. Conversely, when the body is small, the less buying or selling activity is taking place.
In the forex world, traders are familiar with the terms bear (bearish) and bull (bullish). Bear means seller, while bull means buyer. If it is bearish, it means that the price is being pushed up, while bearish means that the price is in free fall.
The longer the green body, the further the closing price (close) is above the opening price. This indicates that the price has increased significantly since the chart was formed and traders are buying aggressively. Conversely, if the red body extends, the closer the closing price is below the opening price. An indication of this is that the price has dropped significantly from when the chart was formed and many traders are selling aggressively.
The lower shadow and upper shadow provide important clues about the current trading session. The upper shadow shows the highest price ever reached in the trading session. While the lower shadow shows the lowest price that has ever occurred in the trading session. The longer the shadow that is formed indicates the transaction that occurred far beyond the opening or closing price of the session. A short shadow indicates that the transaction is not too far from the opening and closing prices.
If what is formed has an upper shadow that is longer than the lower shadow, this means that in that session the price had risen to a certain point, but closed near the opening price. On the other hand, a longer lower shadow indicates that the price had dropped to a point, then closed near the opening price.
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