Candlesticks, Condensed by Dave Cline
Strength In Patterns
They’re the life of the party—simple, elegant, and add so much value. Here’s how you can turn each candle bar into a set of three numbers so you can identify patterns and determine the strength of their predictive power.
Candlesticks are the epitome of information packaging. A candlestick can represent price action—the hem & haw of buyers vs. sellers for a minute, a day, or a year. They tell which party won in the end, which parties began their fight in the beginning, how high the buyers pressed the sellers, how low the sellers drove the buyers (Figure 1). Candles are a simple, elegant device yet they convey so much information.
The variation of candle wick heights and bodies makes it challenging to use them as a tool to consistently tell you what the market is doing.