Basic Candlestick Concept

Different body/shadow combinations have different meanings. Days in which the difference between the open and close prices is great are called Long Days. Likewise, days in which the difference between the open and close price is small, are called Short Days. Remember, we are only talking about the size of the body and no reference is made to the high and/or low prices.

Spinning Tops are days in which the candlesticks have small bodies with upper and lower shadows that are of greater length than that of the body. The body color is relatively unimportant in spinning top candlesticks. These candlesticks are considered as days of indecision.

When the open price and the close price are equal, they are called Doji lines. Doji candlesticks can have shadows of varying length. When referring to Doji candlesticks, there is some consideration as to whether the open and close price must be exactly equal. This is a time when the prices must be almost equal, especially when dealing with large price movements.

There are different Doji candlesticks that are important. The Long-legged Doji has long upper and lower shadows and reflects considerable indecision on the part of market participants. The Gravestone Doji has only a long upper shadow and no lower shadow. The longer the upper shadow, the more bearish the interpretation. The Dragonfly Doji is the opposite of the Gravestone Doji, the lower shadow is long and there is no upper shadow. It is usually considered quite bullish.

The single candlestick lines are essential to Japanese candlestick analysis. You will find that all Japanese candle patterns are made from combinations of these basic candlesticks.