What does a candlestick with a particularly long body signal? | Forex Factory

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What does a candlestick with a particularly long body signal?

  • #1
  • First Post: Feb 11, 2016 8:27am Feb 11, 2016 8:27am
Suppose you were looking for an opportunity to trade a trend reversal and saw a candlestick with a particularly long real body, in the direction of the trend. Would this signal that

  1. The market still has a lot of momentum in the direction of the trend, so a reversal is unlikely?
  2. The market is overextended and a reversal is likely?

I have seen both of these interpretations of a long bodied candlestick suggested in Steve Nison's book 'Japanese Candlestick Charting Techniques', which seems contradictory. Can anyone please help me to understand this?

  • #2
  • Feb 11, 2016 8:51am Feb 11, 2016 8:51am
Quoting Ponzi Jr
Suppose you were looking for an opportunity to trade a trend reversal and saw a candlestick with a particularly long real body, in the direction of the trend. Would this signal that

1. The market still has a lot of momentum in the direction of the trend, so a reversal is unlikely?
2. The market is overextended and a reversal is likely?

Can anyone please help me to understand this?
Hi Ponzi Jr,

Considering that the future is uncertain and either or none of those scenarios could play out regardless of your analysis, you should trade in a way that maximizes your ability to accept the outcomes of your decisions.
  • #3
  • Feb 11, 2016 9:12am Feb 11, 2016 9:12am
I use a combination of technical and fundamental analysis with search for algorithmic patterns.
What does this mean in your thread?
This means that each long momentum I rate based on my own strategy. By comparing it to all of my signals. This is only way I make a decision and follow it.
  • #4
  • Feb 11, 2016 10:06am Feb 11, 2016 10:06am
A long candlestick is just a a single piece of datum. Considered with other data, it might signify reversal or it might signify continuation of the move depending upon other pertinent data. Momentum indicators (oscillators) may be the key here. A longish candlestick after a prolonged trend accompanied by divergence may indicate reversal. A strong momentum accompanying a long candlestick -- mostly at the beginning of a trend -- usually indicates continuation of the move.
  • #5
  • Feb 11, 2016 10:12am Feb 11, 2016 10:12am
Quoting Ponzi Jr
Suppose you were looking for an opportunity to trade a trend reversal and saw a candlestick with a particularly long real body, in the direction of the trend. Would this signal that The market still has a lot of momentum in the direction of the trend, so a reversal is unlikely? The market is overextended and a reversal is likely? I have seen both of these interpretations of a long bodied candlestick suggested in Steve Nison's book 'Japanese Candlestick Charting Techniques', which seems contradictory. Can anyone please help me to understand this?...
There needs to be a context in which the candle occurs before a trader can even begin to attempt to attribute any kind of meaning to it.

For example, a long bodied bull candle in an uptrend that closes at or near a historic high may signal the final push to get the market to where it needs to be before it begins to distribute and sell off - i.e. "reverse". But until the reversal PA prints it's crap shoot as to whether or not a reversal is likely. There are traders who would see the long candle print at the top or bottom and just dive straight in, but remember what Confucius said, "Bottom picker get smelly finger."
  • #6
  • Feb 11, 2016 10:37am Feb 11, 2016 10:37am
Candlesticks and charts are totally overrated.
They are more confusing than helpful.
  • #7
  • Feb 11, 2016 10:45am Feb 11, 2016 10:45am
It's not the pattern you should be paying attention to but rather the principle behind the pattern. A candle that opens on bottom and closes on top that is bigger that those preceeding is an indication of strong buying equivalent to a liquidity gap meaning there were little or no seller from the open to closes so there is nothing in between. A single large candle in itself does not indicate over extension is the price action the follows the candle the reveals what is trully happening. I sudgest you ditch the book and learn the true meaning of price action. It cannot be packaged up into a box and simply play the what ever pattern that is described in the book because to many factors are at play. I suggest looking at where the candles close and the low/highs of the following candles are, also contraction of the candle and the expansion if those the follow. Playing this funny patterns described in the book will only confuse you. It's not the pattern it's the principle behind price action is what matters.
  • #8
  • Feb 11, 2016 11:26am Feb 11, 2016 11:26am
For those of you requesting additional context, consider the following scenario

Attached Image (click to enlarge)
Click to Enlarge Name: IMG_7059.JPG Size: 1.8 MB


As you can see, the market is in a clearly definable uptrend, and a reversal signal has occurred, in the form of a 'hanging man' candlestick. However, the candlestick prior to this signal is strongly bullish, as indicated by its large real-body and its short shadows. Does the occurrence of this strongly bullish candlestick increase the chances that the reversal signal is valid (since it shows that the market is over extended), or does it make it unlikely that the reversal signal is valid (since it demonstrates strong bullish energy still present in the trend)?
  • #9
  • Feb 11, 2016 11:31am Feb 11, 2016 11:31am
That means absolutely nothing.Never get in with these things in mind.you could see several number of fail trades with these kinds of setups. These candles work only certain times.IMHO
  • #10
  • Feb 11, 2016 11:46am Feb 11, 2016 11:46am
Ditch the whole pattern recognition, the price will do as it will. Just cuz the book says it's a reversal, does not mean the price must obey. This is whatkills traders, imposing their own will on the market. When I see this, I do not see a reversal I see a likely stall or continuation utill a price gives me a clue of reversal. Large candle buying, small candle within large is contraction so seller stepped in, the wick which attempted to push down was obsorved by the buyers so it closed up top meanine buyers stepped in buying and pressure pushed it back up. At this point ther eis nothing here,, price is likely to continue unless a candle form indicating selling pressure. Like I said you cannot judge a candle on its only it's all of them combined that paint full picture.

When u look at candles think in terms of buying if selling pressure and how it impacts the candles. You will be able read the price in that manner. Much more valuable than trying to memorize 193747 patterns. Keep it simple. Buying and selling presure.
  • #11
  • Feb 11, 2016 11:49am Feb 11, 2016 11:49am
Quoting Ponzi Jr
consider the following scenario
In this scenario...

The hanging man means nothing. Traders can sell there if they want but there's a good chance they're going to lose money.

At the very least, price would need to break a higher-low, and then there's the potential support to deal with.

Attached Image
  • #12
  • Feb 11, 2016 11:55am Feb 11, 2016 11:55am
In my opinion, candle pattern recognition is theory, what you need to focus on is practical application to be an effective trader.
  • #13
  • Feb 11, 2016 12:09pm Feb 11, 2016 12:09pm
Other than the average range for that single candle is very wide, by itself, nothing. They're all right. It is about the context of that candle/bar
  • #14
  • Feb 11, 2016 1:49pm Feb 11, 2016 1:49pm
Better off looking to go long on retest of support since that's where buyers are
Attached Image (click to enlarge)
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  • #15
  • Feb 11, 2016 2:10pm Feb 11, 2016 2:10pm
Hanging man on top of trend is an extremely unreliable reversal signal. Hammer on the other hand + confirmation of next candle closing below 50% body of the last uptrend candle is a strong sell signal.

Hammers/spinning tops/dojis require confirmation. The reason why you see a long candle in the uptrend/downtrend is exactly why people lose money: "oh look, it has fallen so much, time to buy, Ill put a stop loss somewhere bellow." And at some point in time a huge amount of stop losses accumulate and price spikes down a bit and starts cleaning those stops like a chain reaction, which later propels price into a rebound and buying pressure.

In the last picture where it says "buyers" - try to rethink that - it's stop loss hunt plain and simple.
  • #16
  • Feb 11, 2016 2:20pm Feb 11, 2016 2:20pm
Now it's a stop loss hunt. At this point behaviour continues until break below. Anything before is a two bit spiculation.
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  • #17
  • Feb 11, 2016 2:36pm Feb 11, 2016 2:36pm
Good example of spot loss hunting
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  • #18
  • Feb 11, 2016 8:34pm Feb 11, 2016 8:34pm
What does a candlestick with a particularly long body signal?


The short answer is an increase in VOLATILITY .


The long answer is a bit more complicated, and is at the root of Wide Range Body (or Bar) Analysis.

Using WRB Analysis we can determine where key changes in the Supply/Demand Dynamic occur; which create ideal areas, or zones, to look for trade signals. Take a look at chart 1.

WRBs can also play import roles in trade signals. In this particular trade signal, the appearance of a WRB is a necessary element. Take a look at chart 2.
Attached Image(s) (click to enlarge)
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Click to Enlarge Name: DZ15.png Size: 114 KB
Without VSA, you're playing checkers while the Smart Money plays chess.
  • #19
  • Feb 17, 2016 3:42pm Feb 17, 2016 3:42pm
Quoting HiddenGap
What does a candlestick with a particularly long body signal? The short answer is an increase in VOLATILITY . The long answer is a bit more complicated, and is at the root of Wide Range Body (or Bar) Analysis. Using WRB Analysis we can determine where key changes in the Supply/Demand Dynamic occur; which create ideal areas, or zones, to look for trade signals. Take a look at chart 1. WRBs can also play import roles in trade signals. In this particular trade signal, the appearance of a WRB is a necessary element. Take a look at chart 2. {image} {image}...
Thanks for your input, I've found it very interesting. Would you mind telling me where I can learn more about WRB analysis?
  • #20
  • Feb 17, 2016 6:14pm Feb 17, 2016 6:14pm
Quoting Ponzi Jr
Suppose you were looking for an opportunity to trade a trend reversal and saw a candlestick with a particularly long real body, in the direction of the trend. Would this signal that The market still has a lot of momentum in the direction of the trend, so a reversal is unlikely? The market is overextended and a reversal is likely? I have seen both of these interpretations of a long bodied candlestick suggested in Steve Nison's book 'Japanese Candlestick Charting Techniques', which seems contradictory. Can anyone please help me to understand this?...

Candlestick patterns are just another way of looking at price data. Those who mention that a long body signals an increase in volatility are absolutely correct.
On their own they won't give you an edge. But coupled with level S/R analysis they definitely can!



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