A white candlestick represents a period in which the security’s price has closed at a higher level than it had opened at the beginning of the period. It is a point on a security’s candlestick chart that represents a bullish phase in the security’s price.
An up-candlestick may be displayed in either green or black on various charts, depending on the charting system. When compared to this, a red candlestick indicates that the market closed at a lower price than it did the previous period.
Important Takeaways
• A white candlestick represents a period in which the security’s price has closed at a higher level than it had opened at the beginning of the period.
• A candlestick will display the security’s open, high, low, and close prices for the time period that the user has set.
• Candlestick charts are useful for technical traders because they can readily depict the price change over the course of a single day.
Understanding the Function of White Candlesticks
White candlesticks indicate a positive growth in the price of a securities throughout the course of the observational period of time. On a candlestick series chart, the body of the candlestick will often be depicted in white to indicate that the net outcome of the period’s price movement was positive, as seen in the example below. However, in certain technical charting systems, the trader may be given the choice of selecting a specific hue to signify price advances, such as blue or green.
For a given length of time, a candlestick will typically indicate the security’s open, high, low, and closing prices at various points in time (e.g., weekly, daily, hourly, etc.). The two wicks on each end of the body will serve to indicate the high and low points. The gap between the period’s opening and closing prices is represented by the body of the chart. As a result, candlestick markings represent the range of prices that the securities have recorded over a certain period of time.
Candlestick charts are useful for technical traders because they can readily depict the price change over the course of a single day. For candlestick charts, the default colors are often white/green (up) or red/black (down). However, many charting products now allow traders to alter their color schemes according to their preferences.
Candlesticks in the colors red and black are the polar opposites of white candlesticks. They indicate a negative trend for the rest of the day. When a red/black candlestick is formed, the closing price of a security is reported as being lower than the opening price of the security.
The last scenario in which price behavior may be charted is when the open and close prices are exactly the same. This is referred to as a doji, and it is graphically represented by a dash, which indicates that the charted security’s starting price and closing price are exactly the same.
Shading of Candlesticks
Almost every charting software enables you to adjust the color of the candlesticks, although the most generally used colors are white or black with green filling or hollow, and red with green filling or hollow. A distinct connotation is conveyed by each color:
• White/Green/Black The close of a filled candlestick is larger than the previous close but lower than the open of the candlestick.
• Hollow in white, green, and black Candlesticks are formed when the closing is larger than the previous close and the open of the previous day.
• When the close is lower than the open and preceding close, a red filled candlestick is produced.
• Candlesticks with a red hollow candlestick pattern are formed when the close is larger than the open but lower than the previous close.
Tip: Among the most frequent forms of candlesticks are hollow candlesticks in the colors white/green/black, which are indicative of a strong upswing, and full candlesticks in the color red, which are indicative of a strong downward trend. Red hollow candlesticks and black-filled candlesticks are less prevalent since they need the occurrence of a price disparity.
Contrast Between Candlestick Charts and Bar Charts
Candlestick and bar charts both display the same information (open, high, low, and close), but they do it in a somewhat different method than each other. A bar is a vertical line, unlike a candlestick, that does not have a true body. Instead, it is composed of a tiny horizontal line to the left that marks the open price and a little horizontal line to the right that marks the close.
Indicators of Candlestick Patterns and Technical Analysis
Technical analysis indicators are created by combining the candlesticks of white, red, and doji colors. Several short- and long-term patterns may be employed as indications for security investing, both short- and long-term in nature. Before looking at any other features of the chart, technical analysts may immediately learn a great deal of information from the color of a single candlestick. Example: A red-filled candlestick indicates that the price is in a clear and strong decline, while a white-filled candlestick indicates that the price is getting more top-heavy, as in the case of the stock market.
Traders may use these insights to judge the general mood of the market. The majority of traders use candlestick charts in combination with other types of technical analysis. For example, they may utilize candlestick charts to evaluate market mood before using chart patterns to indicate probable regions of breakdown or breakout. Technical indicators may also be valuable in confirming the direction of the market’s momentum. To illustrate how strong a trend is in a particular direction, the relative strength index (RSI) may be used in combination with candlestick charts.
On a technical analysis chart, there are many candlestick patterns that may be observed.
The ones listed below are common.
• The formation of an ascending channel occurs when the price of a security is increasing. White candlesticks will mostly be used in this sort of broadcast channel.
• A falling channel is established when the price of an asset continues to decline over time, as in the case of gold. The majority of the candlesticks in this sort of channel will be red in color.
• When a bearish abandoned baby pattern is formed, three successive candlesticks with the center of the candlestick centered with a dot are formed. A bearish abandoned baby might be a harbinger of a downward breakthrough in the market. This pattern happens when a white candlestick is followed by a doji above the previous day’s close, and then a red candlestick with an open below the previous day’s close occurs after the white candlestick pattern.
• Bullish abandoned baby: A bullish abandoned baby pattern is the polar opposite of a bearish abandoned baby pattern, as the name implies. This pattern indicates the possibility of an upward trend reversal. Starting with a red candlestick, followed by a doji below the previous day’s close, and finally with a white candlestick with an open above the previous day’s doji open/close, a bullish abandoned baby pattern is formed.