What is the Importance of Open and Close in a Candlestick Analysis?
It encompasses the Body of the Candle. It defines, generates and gives shape to the Body which goes on to summarize the day into Strength or a Weak Candle.
Here’s how we can arrive at Body and Candle Height and decide on the type of Candle either a Strength Candle or Weak Candle (Refer Fig.1).
To the extent of the Body Height of the Candle to the Candle Height it conveys whether the trend was one sided or both sided movement.
A Strength Candle as above is the one that has the potential to give direction of the trend and it is one of the criteria for Breakout.
A Breakout typically must have a Strength Candle crossing the Breakout Line and hence these strength candles are also referred as Breakout Candles. (Refer Fig.2)
For Intraday Trading on 5min chart, we shall look for two consecutive Breakout Candles for breakout Confirmation above open range (Refer Fig,3)
The two consecutive BH>50% CH, breakout candles can also be used to detect change in trend direction depending where they are formed either at their respective High or Low. (Refer Fig.4)
In the below graph,when two consecutive breakout candles having BH>50%CH can detect change in trend direction when formed at the bottom. (Refer Fig.5)
With the help of the below picture, you should train your eyes to spot the two consecutive BH>50%CH candles on the upside and down side at their High or Low. (Refer Fig.6)
Particularly in each of these candles below, notice the Body Height is more than 50% of the Candle Height.