Still looking for help?

Do candle formations have a important role in chart reading to you?

Original Question: I often see you mention island gaps, inside and outside days… Do candle formations have a important role in chart reading to you?

First of all candlesticks and HLC or OHLC bars contain the same information. So what we are talking about are price and volume formations as measured on a daily basis.

To make this story short, the interpretation of such price and volume formations are actually the A to Z of chart reading right where the action takes place or where the rubber meets the road as Gil used to say. Learning to read this signature should be your top priority over the years. I am currently working on a large series called Chart School and it comes in six chapters. Inside, outside days, reversals, price volume anomalies, volatility contractions and change in character are all part of this. What I don’t like about candlesticks is that people are way to strict with how they should appear on the chart. And putting labels on daily formations such as shooting star or hanging man is just another added layer of unnecessary complexity. Even when you use candlesticks you should ignore the candlestick labels and learn to just READ the price and volume signature. It is hardly ever the same but it oftentimes ryhmes. You’ll get a hang of it once you put in the practice hours needed.

Explaining all this is obviously way too much to be covered in a simple Q&A post.

1 Share

Stay connected

No spam or recurring e-mails

Risk disclaimer

The content provided by Thweis does not constitute financial advice, guidance or recommendation to make or not to make any transaction, investment or decision in the context of financial markets. The content provided is impersonal, non-binding and not tailored to any particular individual user, trader or business. For this reason, we encourage you to seek professional financial advice before making any investment decision. Results are not guaranteed and may vary from person to person. Trading involves inherent risks, including the loss of your Investment capital or even beyond that. Past market performance is not indicative of future results. Any investment is solely at your own risk, you assume full responsibility. Read more in our full risk disclaimer.

Copy link