COMMON SIGNALS

Now that you're familiar with the benefits of using candlestick charts versus standard bar or line charts, it's important to know that there are two major types of candlestick signals: extreme and neutral. As mentioned, candles reveal the intensity of the imbalance between supply and demand. Extreme candles with long real bodies reflect intensity on the part of buyers or sellers, while neutral candles with very small or even non-existent real bodies reflect lack of intensity on the part of both buyers and sellers. By assessing the intensity factor of buyers or sellers, you can then use that knowledge in context to assess the odds of a price move continuing to move in the same direction or possibly reversing to a new direction.