There have been many books written about candlestick patterns; several feature hundreds of patterns. Don’t get bogged down in trying to memorize the countless combinations that are featured in these books.
Just get to know the basic patterns, and get really good at spotting them. Other than that, don’t read too much into candlestick patterns. Just a handful of patterns cover 99 percent of what happens in the real world.
A candlestick chart shows each candle as a color-coded rectangle (called the candle body) representing the range of trading between the open price and closing price of the period.
If the closing price is higher than the opening price, the candle is colored with the user specified up color, otherwise, the down color. At FX Bootcamp, green is up and red is down. Vertical lines, called wicks, are drawn protruding from the upper and lower edge of the candle body to represent the high and low extremes of trading during that period. See Figure 12.1
In Figure 12.1
, the first candle would be red. There are no wicks, just a body. This would indicate that price opened high and fell during the entire period of the candle. The second candle has no body, only wicks. This would indicate price opened, moved up and down a bit, and then closed at the same price as it opened. The last candle would be green. It has a body and wicks. This would indicate that price opened, fell slightly, then rose to close just below its highest point.