# Reading Candlestick Chart. School of Pips

In the following images found in the school of pipsology candlestick(hammers) section I am having a hard time understanding the candlesticks… On every website and learning resource Ive seen including the live charts the close of one candlestick is the opening of the next but (ignore the red circles and the titles of the chart) the candlesticks shown here dont seem correlated to the previous one… Assuming the bottom of the body of a black candle is the close price for that period of time, the top or bottom of the following candle(depending on its direction) should start at that same point. Even if I got these backwards(dont think I did) there doesnt seem to be any correlation between the open/close body of the candle and the open/close of the candles before or after it here.

Am I missing something crucial? None of the candlestick charts I have seen have ever looked like this. The close of 1 candle body has always matched the open of the next candle body.

edit: for reference the section I was reading was “Single Candlestick patterns” Elementary Grade 2

There can be gaps between candles. In this case I think the drawing was just not made as carefully as you find it necessary. The second third and fourth black candles are nto drawn correctly. There should be wicks on their tops. The first white candle is also incorrectly drawn. The wick at the bottom should extend all the way to where you drew a line through it. The difference between the close of that candle and the opening of the following black candle is just imprecision in the drawing. The point of the drawing is to illustrate a hammer, not to teach proper candle illustration.

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Thanks so much for the response Bee! Its good to know its just imprecision in the drawing rather than my knowledge. It does make it hard to follow the idea being presented when the drawing appears so off though. Even the circled white candle(the hammer, the focus of the topic) appears completely inacurately drawn(from my understanding only), Shouldn’t the BOTTOM of a white candle match the BOTTOM of the previous black candle? Either that or the circled candle should be black… But then that just carries the problem over to the next candle.

I guess I get the point, Its just when the graphs look contrary to what the previous lesson already taught you, its hard to figure out which is accurate.

I assume the only way there can be a gap between candles as you said would be the candles before and after the markets close for the weekend/holiday? Otherwise I didnt realize there could be a mismatch between the close of 1 period and the open of the next.

Gaps between candles can occur at any time, though after a weekend is the most common. The hammer candle is drawn wrong as you point out. It would be correct if it were black. The bottom of the white could have a wick (price opens at black close, goes bear for soem amount then increases) otherwise, you are right that the bottoms should be equal.

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Thanks Bee, greatly appreciate your help and explanation!

Gaps between intra-day candles and forex candles on any timescale are rare and not often large (though forex can gap after a weekend as has been stated) because trading is continuous with no time gap.

Many educational sources are using stock price charts to teach patterns and trading guidelines. Stocks have a closed session overnight until the start of the next business day, so gaps are very common every day. This in part explains why candlestick patterns that rely on differing closing and opening price levels do not perform as well as expected either intra-day or on forex dailies.

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Well markets are random most of the time so you can get any combination of tails (N successive up or down), of various lengths of body and tails. Your goal is to trade patterns you learned and that you understand (what was motivation of bearish and bullish forces behind particular candle formation). Ignore candles that are hard to interpret.

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Great analysis and explanation on candestick charts in above replies. Thanks guys. Found it helpful.

Candle charts are based on transactions within a given time frame. If the next transaction after the candle closes is at a higher price than the candle closed at then you will have a gap up. Another reason can be you are looking at a gap from the weekend.

The difference between two consecutive candles closing price and opening price is called the gap. Gaps also occur due to the overnight sentiment of the participant or any big news. Gaps can happen moving up or moving down. In the forex market, gaps primarily occur over the weekend because it is the only time the forex market closes. Gaps may also occur on very short time frames such as a one-minute chart