Understanding Technicals - Types of Candlestick

Before starting with understanding technicals, we would recommend going through the video
resource module where the basics of candle candlesticks and how to interpret a candle are
explained.

Candlesticks are a very important part of technical analysis and are the most widely used charts
by traders worldwide. The reason for candlesticks being so popular is that the candles can
accurately depict the emotion of the market. Understanding the candles will help us clearly
understand the sentiment and the next probable move in the market.

Today we will be discussing the types of candle and what is it probable implication if it appears
on the charts.

Marubozu Candle-

Marubozu is a Japanese word meaning

Dominance. As you can see from the image
shown the candle is having a proper body. The
green candle showing a positive Marubozu and
the red one showing a negative Marubozu.
In the image as you can see there no wicks in
the candle and has a big body. The big body of
the candle refers to dominance. From the type
of candle, we can say that a particular session
was completely dominated by the bulls if it’s a green candle or bears if there was a red candle.
The Morubuzu candles implication can be inferred as bulls or bears have complete dominance
of the session and this momentum might continue further in the market. It can be seen as
complete dominance because the closing price is going to be the high/low of the day depending
on who dominated the session.

Spinning Top-

As you can from the image the spinning top

candles have long wicks on both sides showing the
high of the day and low of the day. The body of this
candle is very small showing that the share closed
marginally above or below their open price, not a
very significant move. The interpretation of a
spinning top candle shows that the session was
indecisive. The share or the market opened and
closed with a marginal difference indicated by the
body, but both bulls and the bears were active in the session but none of them were able to gain
an upper hand and dominate the session which is indicated by the wicks of the candle. The
spinning top candles are generally considered neutral candles.

Doji-

Doji represents an important type of candlestick, providing information both on their

own and as components of several important patterns. Doji form when a security's
open and close are virtually equal. The length of the upper and lower shadows can
vary, with the resulting candlestick looking like a cross, inverted cross, or plus sign.
Alone, Dojis are neutral patterns. Any bullish or bearish bias is based on preceding
price action and future confirmation.

There are many types of Doji candle formation and we will try to understand some aspects of
those various kinds of Doji.

Long Legged Doji-

Long-legged Doji has long upper and lower shadows that are almost equal in
length. This Doji reflects a great amount of indecision in the market.
Long-legged Doji indicates that prices traded well above and below the
session's opening level, but closed virtually even with the open. After a whole
lot of yelling and screaming, the result showed little change from the initial
open.
This represents an extremely volatile session in the market but the closing of
the session was near its o[ening price

Dragon Fly Doji-

Dragonfly Doji forms when the open, high, and close are equal and the low creates
a long lower wick. The resulting candlestick looks like a “T” due to the lack of an
upper wick. Dragonfly Doji indicates that sellers dominated trading and drove
prices lower during the session. By the end of the session, buyers resurfaced and
pushed prices back to the opening level and the session high.
The long lower shadow provides evidence of buying pressure, but the low
indicates that plenty of sellers still loom.
This kind of candle normally suggests or shows a lower level buying or popularly
called buyers’ buying on dips and maintaining the levels.
Grave Stone Doji-

Gravestone Doji forms when the open, low, and close are equal and the high
creates a long upper wick. The resulting candlestick looks like an upside-down
“T” due to the lack of a lower shadow. Gravestone Doji indicates that buyers
dominated trading and drove prices higher during the session. However, by
the end of the session, sellers resurfaced and pushed prices back to the
opening level and the session low.
Even though the long upper shadow indicates a failed rally, the intraday high
provides evidence of some buying pressure.
This kind of candle generally suggests us there was profit booking coming in
from the higher level and then the sellers dominated the end sessions.

The above discussed are some of the most popular candles and types of candles that can be
seen in the chart analysis of any security.

What Can be inferred from the above analysis?

If you would have noticed longer the candle’s body, it shows the dominance of bulls/bears in the
session and if there are longer wick, this implies the indecisive move bulls bears trying to get
hold of the market session but are failing to do so.
These candles help us to understand the emotion behind the trading and what could be the
further coming sentiments.
The candles can depict the tug of war going on between bulls and bears in a very illustrative
manner which the investors and traders can use for their benefit.