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How to Identify Candlestick Strength | Trading Basics

Hey traders,

In this educational article, we will discuss

Please, note that the concepts that will be covered in this article can be applied on any time frame, however, higher is the time frame, more trustworthy are the candles.

Also, remember, that each individual candle is assessed in relation to other candles on the chart.

There are three types of candles depending on its direction:

🟢Bullish candle
Such a candle has a closing price higher than the opening price.

🔴Bearish candle
Such a candle has a closing price lower than the opening price.

🟡Neutral candle
Such a candle has equal or close to equal opening and closing price.

There are three categories of the strength of the candle.
Please, note, the measurement of the strength of the candle is applicable only to bullish/bearish candles.
Neutral candle has no strength by definition. It signifies the absolute equilibrium between buyers and sellers.

1️⃣Strong candle
Strong bullish candle signifies strong buying volumes and dominance of buyers without sellers resistance.

Above, you can see the example of a strong bullish candle on NZDCHF on a 4H.

Strong bearish candle means significant selling volumes and high bearish pressure without buyers resistance.

On the chart above, you can see a song bearish candle on EURUSD.

Usually, a strong bullish/bearish candle has a relatively big body and tiny wicks.

2️⃣Medium candle
Medium bullish candle signifies a dominance of buyers with a rising resistance of sellers.

You can see the sequence of medium bullish candles on EURJPY pair on a daily time frame.

Medium bearish candle means a prevailing strength of sellers with a growing pressure of bulls.

Above is the example of a sequence of medium bearish candles on AUDUSD pair.

Usually, a medium bullish/bearish candle has its range (based on a wick) 2 times bigger than the body of the candle.

3️⃣Weak candle
Weak bullish candle signifies the exhaustion of buyers and a substantial resistance of sellers.

Weak bearish candle signifies the exhaustion of sellers and a considerable bullish pressure.

Usually, such a candle has a relatively small body and a big wick.

Above is the sequence of weak bullish and bearish candles on NZDCHF pair on an hourly time frame.

Knowing how to read the strength of the candlestick, one can quite accurately spot the initiate of new waves, market reversals and consolidations. Watch how the price acts, follow the candlesticks and try to spot the change of momentum by yourself.

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