The image below shows two candlesticks that best illustrate this. The white candlestick is shown on the left with high, low, open, close and close marks. This candlestick is used when the closing price exceeds the opening price. Since the closing price was lower than the open, the candlestick's body is black.
The hair that grows from the top of a candle is called the upper shadow. The candle's bottom shadow is one leg hanging from it. Candle patterns are something traders should be aware of. They include changing shadows and lengthening candles.
The shadow is the last part of the candlestick, as mentioned earlier. It can also be called tail or wick. It is used to determine the market mood for the day by measuring the length or absence of shadows. Long upper shadows, for example, are an indicator of bearishness. These shadows are created when bulls attempt to raise the price but lose control in the middle and the market settles below the high. Longer shadows that are lower than the highs are bullish, as the bears cannot sustain the pressure until closing.
A shooting star is a bearish candlestick that has a long upper shadow. It has a very low shadow. After an uptrend, a shooting star forms. It is a type of candlestick that forms when security opens and advances but closes at the opening levels.
If the formation appears during a price rise, a candlestick is considered a shooting start. The distance between the highest and lowest price of the day must not exceed twice the body's length. The shadow should not be below the body.
Shooting stars signify a price top or reversal. It's most effective when it forms after a sequence of three or fewer consecutive rising candles with higher highs. Even if some candles in recent months were bearish, a shooting star can also be formed during a period when prices are rising.
A shooting star appears after the advance and continues to rise steadily throughout the day. This is similar to the buying pressure seen in previous periods. The bears take control and push the price down as the day progresses, thus erasing any gains made. This is a sign that the buyers were losing control and that sellers were now in charge.
The shooting star candle is confirmed by the candle that was formed after the shooting stars. The candle's next high must be lower than the shooting star. The next candle should be lower than the shooting star's close.
Traders will usually sell when the price falls after a shooting stars. This means that the price could continue to fall. The price range of the shooting stars may act as resistance if the price moves upwards after a shooting Star. The shooting star may be the one that causes the price to consolidate. If the price continues to rise, traders might prefer long positions to shorting.
Always confirm. In a major uptrend, one candle is not significant. Prices tend to fluctuate. It is possible that the sellers only have control of a portion of the period. This may not be significant.
Even though confirmation may sometimes be given, it is not a guarantee that prices will fall. The prices may continue to rise in line with the longer-term upward trend after a brief fall.
Stop losses may be used by traders to limit their exposure while still using candlestick. This can reduce risk. It may also be beneficial to use candlesticks with other types of analysis. Candlestick patterns that occur near important levels may have a higher level of significance.
A shooting star is similar to an inverted Hammer so traders need to be cautious when identifying it. Both patterns have large upper shadows and small real bodies at the candle's low end. There is little to no lower shadow. The difference between the two patterns is that the shooting stars emerge after a price rise and mark a turning point lower, while the inverted hammer appears following a decline in price and marks another potential turning point higher.
During a price rise, a long upper shadow candlestick will appear. Traders will know it is there when the distance between the highest and opening prices of the day is greater than twice the body. The shadow is not visible below the body.