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Candlestick Shadow

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Candlestick Shadow

A candlestick shadow (also called a wick) is the thin line extending from the top or bottom of a candlestick in a price chart. It represents the highest and lowest prices an asset reached during a trading session, showing price rejection and volatility. Shadows provide critical insights into market sentiment and potential trend reversals.

Understanding Candlestick Shadows

A candlestick consists of two main parts:

  • The Body → The rectangular section showing the open and close prices.
  • The Shadow (Wick) → The thin lines extending from the body, indicating the session’s high and low prices.

There are two types of shadows:

  1. Upper Shadow (Wick) → Shows the highest price reached before closing lower.
  2. Lower Shadow (Tail) → Shows the lowest price reached before closing higher.

How to Interpret Candlestick Shadows

  • Long Upper Shadow, Short Lower Shadow
    • Indicates selling pressure.
    • The price attempted to rise but was rejected, suggesting bearish sentiment.
    • Example: Shooting Star (Bearish Reversal).
  • Long Lower Shadow, Short Upper Shadow
    • Indicates buying pressure.
    • The price dropped but buyers pushed it back up, suggesting bullish sentiment.
    • Example: Hammer (Bullish Reversal).
  • Long Upper and Lower Shadows
    • Shows high volatility and indecision between buyers and sellers.
    • Example: Doji or Spinning Top candlestick.
  • Short or No Shadows
    • Indicates strong momentum in the direction of the body.
    • Example: Marubozu (Full-body candle).

Examples of Candlestick Patterns Using Shadows

  1. Hammer (Bullish Reversal) → Long lower shadow, small body at the top.
  2. Shooting Star (Bearish Reversal) → Long upper shadow, small body at the bottom.
  3. Doji (Indecision) → Small body, long upper and lower shadows.
  4. Engulfing Candles → Minimal shadows with strong trend continuation.

Why Candlestick Shadows Matter

✔️ Identify Reversals → Long shadows signal potential price reversals.
✔️ Confirm Market Sentiment → Shadows show rejections and failed breakouts.
✔️ Improve Trade Entries → Traders use wicks to set stop-loss and entry levels.

FAQs

What is a candlestick shadow?

A thin line extending from a candlestick body, representing the session’s high or low price.

What does a long lower shadow mean?

It suggests buyers rejected lower prices, indicating bullish strength.

What does a long upper shadow mean?

It shows sellers rejected higher prices, suggesting bearish sentiment.

What is the difference between a wick and a shadow?

Both terms refer to the same thing—the thin line showing price extremes.

How do traders use candlestick shadows?

To spot price rejections, reversals, and potential trade setups.

Can a candlestick have both upper and lower shadows?

Yes, this suggests high volatility and indecision.

What does a candlestick with no shadows mean?

It indicates strong momentum in the direction of the close.

What is the best pattern with long shadows?

Hammers and shooting stars are highly reliable reversal signals.

Are candlestick shadows reliable for forex trading?

Yes, they work well in forex, especially when combined with support/resistance levels.

Do shadows affect stop-loss placement?

Yes, traders often place stop-loss orders above/below shadows to avoid being stopped out by market noise.

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