Candlestick Formations Wicks

Many materials have been written on various candlestick formations. In my experience, the new trader will put far too much weight in these formations, Treating these formations as if they are some secret sauce to conquering the markets. In my experience, candlestick formations and patterns are important, but what is not as critical is memorizing every catchy name for the formations and reciting them off the top of your head. Once a trader understands the principles and market forces these formations convey, the trader will be much more informed than just memorizing their names.

The essential concepts of analyzing candlestick formations relate to the candlestick bodies’ size and wicks on the analyzed candles. The volume present for the relevant candlesticks should also be a significant consideration when looking at candlestick formations to gauge market participation.

Core Concepts on formations:
Wicks:

• A long wick coming out the bottom of a candle on a downtrend may reflect that a local floor has been reached for the asset. The long wick reflects this because it shows that the market has readily bought up the asset’s price at lower prices.
  
• For example, here is what is known as a "bullish hammer,” or Dragonfly Doji,
  
  
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  you will notice a massive wick coming out the candle body’s bottom (reflecting the intense buy pressure at those lower levels). Subsequently, no candle body closed below this Bullish Hammer/Dragonfly Doji body.
  

• Similarly, a long wick coming out the top of a candle on an uptrend may reflect that a local top has been reached for the asset. The long wick reflects this because it shows that the market has readily sold down the asset’s price at higher prices.
  
• For example, here is a local top reached in September 2020 for the S&P 500 (the second arrow pointing out a long wick to the bottom and resumption of trend):