Colour is not strength

The colour of a candle says one thing only: its direction. Close above the open and the candle is drawn green; close below it and the candle is red. How decisively price moved is told by the length of the body. A long body is a firm carry from open to close, a short body is a period in which neither side gained the upper hand. On a chart you read direction from the colour first and conviction from the body second, and two candles of the same green can describe two different periods, one decisive and one hesitant. The most common misreading is to take colour for strength: a run of short green candles is not stronger than a single long one, and the number of green candles is not a measure of anything. Colour is also a convention rather than a law — on some exchanges a rising candle is drawn red — so the habit worth building is reading where the close finished relative to the open, not memorising a colour. For risk literacy the lesson is this: whoever mistakes colour for strength reads the direction of one period as a promise about the next, when colour is only the summary of a period already gone.

This content is educational information, not personalised investment advice. The chart examples are illustrative.

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