What does a candlestick with a particularly long body signal?

Beginner Questions Candlesticks, Chart Patterns, and Price Action
#1

Suppose you were looking for an opportunity to trade a trend reversal and saw a candlestick with a particularly long real body, in the direction of the trend. Would this signal that
[ol]
[li]The market still has a lot of momentum in the direction of the trend, so a reversal is unlikely?
[/li]
[li]The market is overextended and a reversal is likely?
[/li]
[/ol]

I have seen both of these interpretations of a long bodied candlestick suggested in Steve Nison’s book ‘Japanese Candlestick Charting Techniques’, which seems contradictory. Can anyone please help me to understand this?

#2

The only thing that is certain is uncertainty.
Sometimes a “candlestick with a particularly long real body, in the direction of the trend” will be a buying signal. Other times a “candlestick with a particularly long real body, in the direction of the trend” will be a selling signal.

Do you play golf?
What would Tiger Woods’ answer be to this question: What club would you use if you were 80 yards away from the pin?

His answer would be- DEPENDS.

Long story short, that’s my answer. DEPENDS.
Context trumps candlesticks.

#3

Hi JRC,

If I see a long body candlestick, here are the questions that I will ask myself:

  1. What color?
  2. Where did it form?
  3. Are there any other candlestick pattern prior to that candlestick body?

Usually, I dont trade after a long body candle stick formed because:

  1. My risk/reward ratio is already off.
  2. When it formed it is usually hundreds of pips off away from a solid support/resistance line.

So, what I will do are:

  1. Wait. Sooner or later it will stop/slow trending up or down
  2. Then wait. Wait for candlestick pattern to form.
  3. Look. Look if the candlestick pattern form at a major resistance/support level.

So here is your takeaway.

  1. Dont try to trade after a long body candlestick pattern formed. Usually it is already off your risk/reward ratio.
  2. Know your support and resistance level.
  3. The momentum of the trend will usually die down after several runs. This will be followed by a dip or rebound.
  4. Observe for any candlestick reversal pattern at key support/resistance level.
  5. Set your risk/reward ratio.
  6. Trade!
#4

Doesn’'t really matter.

If it doesn’t go with your plan, don’t trade it.

If you’re planning to do reversal trades using candle sticks. Stick with knowing the appearance of a real reversal candle.

Don’t think about other stuff that are outside your plan. It’ll just mess with you mentally.

#6

Hi everyone,
Try reading “Japanese Candlestick Charting Techniques” - By Steve Nison
It will help with understanding of Candlestick techniques that can go a long way.
Let me know if this was helpful.
Cheers, V