Forex Candlestick Chart Patterns – Shadow
Shadow or often also called the axis in candlestick terms. Ever heard of it? Should’ve never been. If you have not, please read the previous article and download MT4 for practice with a demo account.
Shadow shows the fluctuations that occur by printing high and low values over a certain period. Shadow can be above and / or under body candle. If the shadow is above the body we call Upper Shadow so that the shadow end is the highest level in that period. While the shadow is under the body we call the Lower Shadow so that the shadow end is the lowest level in that period.
The shadow scale varies in terms of length or length. Each will give a different meaning of information. As well as the size of the real body candle, this triggers the development of candlestick from year to year.
Some analysts interpret the long shadow as a potential for reversal. In other words, the long Upper Shadow has the potential price down and instead the long Lower Shadow has a potential price rise.
Let’s have a little imagination about price movements in a candle. When the Open then the price moves up far to print high (the possibility of buyer dominate). But over time the price reverses down to make a candle shape with long upper shadow (possibly seller dominate). This could be a bearish signal.
Conversely, when the Open then the price moves down far to print low (chances are the seller dominates). But over time the price turned up to make a candle shape with a long lower shadow (likely buyers dominate). This will be a bullish signal.
Well, from the description above, what can we do when it appears long shadow? Of course, reversal. Candle with long upper shadow and short lower shadow that appears when the up trend can be an indication of retrace / reversal motion. Especially if the candle was closed bearish.
Conversely, Candle with long lower shadow and short upper shadow that appears when the downtrend can we make an indication of motion retrace / reversal. Especially if the candle was closed bullish.
There are many types of candle with long shadow that is Hammer, Inverted Hammer, Dragonfly Doji, Gravestone Doji, Hangingman, Shooting Star and others.