Single-candle shapes

Some candle shapes have names of their own. A candle with almost no body is a doji: open and close are nearly the same and the period ended in a draw. A small body with a long lower wick underneath it is a hammer: the downside was tested, it did not hold, and the period closed near its top. A candle with no wicks that travelled one way from start to finish is a marubozu. Each name is shorthand for a sentence you could already say in body-and-wick language, and recognising a shape on a chart means reading that sentence at a glance. The most common misreading is to dress the shape in a story: "a doji announces a reversal", "a hammer marks the bottom". The same hammer means one thing after a long decline and something else in the middle of a directionless stretch; what the shape says is fixed, what it points to is decided by its surroundings. A single candle summarises one period; without what came before and after, it is not a story. For risk literacy: knowing a shape's name and knowing what it means on this chart are two different things — the second needs context, the first is only memory.

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

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