First off, the obvious – the longer the candle, the stronger the pressure. If it’s green, we can assume that the buyers were controlling the market and pushing up prices. If it’s red – the sellers pushing them down. Candles with short bodies means there was little decisive movement pricewise. Unless the wicks are long.

How the body and wicks interact is ALSO important. Now, because these candles were created by the Japanese, they all have very colorful names. So, as we said, one of these long wicked, short bodied candles is called a doji – not to be confused with the dojo where you practice your aikido.

The simplest is the 4-price doji, where really nothing significant happened. A long-legged doji has extremely long wicks and signifies a volatile time period – strong market forces competing, and we should prepare for a breakout one way or the other.

Dragonfly dojis have a long wick above the body. Here, we see bullish forces forming, but not enough to actually widen the body.

Finally, Hammer dojis have a long wick BELOW the body. We have the bears waking up, trying to pull down the market but not quite there yet.

OK, now let’s let the bodies widen a bit. If we go to the extreme – hardly any wick, we have a marubozu candle – where opens and closes, highs and lows corresponded. The harder we are into a trend, the more of these we’ll be seeing.

We’ll see this bad boy – the hanging man, usually at the top of an uptrend, just as it reverses. It might be green, it might be red. What’s important is the down-hanging wick – lots of bearish buyers.

Its nicer brother is the hammer – a nice long wick ABOVE the candle, indicating a possible bullish reversal at the end of a downtrend.

Finally, the spinning top. As with the long-legged doji, we have indecision here, so that at the top or bottom of the trend, we can expect either a breakthrough – if we’re at a key level – or a reversal, if the support or resistance are stronger than the sellers or buyers respectively.