Colour of the candles

[lucacrebbe]

Hello sorry for the noob question.

Let's suppose I see in the chart a reversal hammer at the ending of a bull trend.

Whic is the difference between a green reversal hammer, and a red reversal hammer?

The meaning should be the same: reversal hammer a end of a bullish trend --> reversal likly upcoming.


What is the difference if the candle was green or red ?

In a green hammer have they won the ''bulls'' ? In a red candle have they won the bears?

It seems absurd, because the volume can not be ''green'' bullish, or ''bear''... the volume should be always immer the same: (if I buy there always will be someone selling)
So what's the difference between a red candle or a green candle

 

[Enivid]

Do you mean inverted hammer? Like this?



Actually, it is a two-candle pattern and requires a tall bearish candle before it. Like this:



The color of the second candle does not matter.

Although the pattern is considered a trend reversal one, Thomas Bulkowski in his experimental study of thousands of candlestick patterns has found that it actually works opposite - it is a good sign of a trend continuation.

It seems absurd, because the volume can not be ''green'' bullish, or ''bear''... the volume should be always immer the same: (if I buy there always will be someone selling)

This is not absurd because while the volume of actual sell and buy deals is always the same, the number of orders (traders) willing to buy or sell the instrument varies by price levels. If, at a given price level, the number of buyers exceeds the number of sellers, the price goes up. So, we assume that if the price went up at some point, this means that there were more buyers than sellers below the end point.

 

[lucacrebbe]

Do you mean inverted hammer? Like this?

View attachment 12648

Actually, it is a two-candle pattern and requires a tall bearish candle before it. Like this:

View attachment 12649

The color of the second candle does not matter.

Although the pattern is considered a trend reversal one, Thomas Bulkowski in his experimental study of thousands of candlestick patterns has found that it actually works opposite - it is a good sign of a trend continuation.


This is not absurd because while the volume of actual sell and buy deals is always the same, the number of orders (traders) willing to buy or sell the instrument varies by price levels. If, at a given price level, the number of buyers exceeds the number of sellers, the price goes up. So, we assume that if the price went up at some point, this means that there were more buyers than sellers below the end point.

Thank you so much.

Well I know that the ''open buy/sell orders'' are what make the colour of a candle, but I don't know if the number of people willing to buy/sell a stock (limited/open orders) can really be taken into consideration

Basically it's the Depth Market... you can't know if Istitutional have placed a large sum of money to push the price up and make it the apperence of a bullish trend upcoming, and then they will cancel the order.

That's why I don't relay on the depht of market.. but maybe I am wrong, sorry that's what some friends told me

The colour of a candle is the ammount of buy/sell orders at that level of price?

So for example in the second image you posted, the long red candle shows that in that day there was a prevalence of selling orders?

How do you move when you see a bullish hammer at the end of a bear trend, but this hammer is RED colored?

Are you still confident about a possisble reversal, or not?

 

[Enivid]

The colour of a candle is the ammount of buy/sell orders at that level of price?

No. It only shows whether the price fell or rose. However, one could conclude that the price fell because "there were more sell orders than buy orders" - figuratively speaking. Because the actual number might be irrelevant. What matters is their size and price level - the Depth of Market.

So for example in the second image you posted, the long red candle shows that in that day there was a prevalence of selling orders?

Perhaps. Or maybe there was one big sell order that started to get filled at the top price and ended filling at the bottom. Why does it matter?

How do you move when you see a bullish hammer at the end of a bear trend, but this hammer is RED colored?

Are you still confident about a possisble reversal, or not?

According to Bulkowski, who backtested a lot of them (but mostly in stocks), the trend continuation is the most reliable outcome no matter the color.

 

[lucacrebbe]

Thank you so much, you are making me to understand how it works

No. It only shows whether the price fell or rose. However, one could conclude that the price fell because "there were more sell orders than buy orders" - figuratively speaking. Because the actual number might be irrelevant. What matters is their size and price level - the Depth of Market.

You say 'What matters is their size and price level'

''their seize'' ‒ > is it the weight money ?

Is it how much money is into the bid or into the Ask side?

If there is more money into the bid side is the price supposed to go up ?
if there is more money into the ask side of the orderbook is the price supposed to go down ?

What if would be there FAKE big orders, made to trick the retailer trader to think that the market has taken a clear direction, but in the end it is only a trick of the institutionals that will delete those orders as soon as the market is about to fill them ?


Sorry for all that questions

 

[Enivid]

Is it how much money is into the bid or into the Ask side?

Yes, the volume of the trade. E.g.: 1 lot, 2 lots, etc.

If there is more money into the bid side is the price supposed to go up ?
if there is more money into the ask side of the orderbook is the price supposed to go down ?

If we are speaking purely of the orderbook, then not necessarily. The orderbook is composed of pending orders and they are subject to change.

What if would be there FAKE big orders, made to trick the retailer trader to think that the market has taken a clear direction, but in the end it is only a trick of the institutionals that will delete those orders as soon as the market is about to fill them ?

I am not sure that anyone can remove an order when it is about to get filled. But even if they are, that would not change much in terms of the price. If order is not filled, the price does not change.

 

[lucacrebbe]

I am not sure that anyone can remove an order when it is about to get filled. But even if they are, that would not change much in terms of the price. If order is not filled, the price does not change.

Thank you.

But if the size of the opened orders does not matter for the price movement, isn"t this contradictory ?

Because you said that the Depht of Market is important in order to understand in which direction the price could move

And what is the Depht of Market , if not the general size of opened sell / buy orders, in a given market ?

I think the Depht of market is the ammount of money in ask or in bid

Well if there is more money in ask the price should go up

But what if an Institutional, bot high frequency trader put fake big orders corrupting the Depth of M. showing a false bullish or bearish sentiment ?



Please could you explain how institutionals with a lot of money , willing to manipulate the market, can take an advantage out of the market ?


what do they usually do?

Do they place a big order just a tick behind the Ask or the Bid price tricking the retail to sell or to purchase?

Or do they place their big orders far away from the current price?



for example lets suppose that the current ask of a Stock is 33 $

do they place a big buy / sell order at the price 31 $ (that they will delete just before it"s about to get matched) giving the false sense of confidence to the retail investitor, that the market has taken a clearly direction ?

I would like to understand their minds as much I can, in order to have more variable before entering into a trade

 

[Enivid]

But if the size of the opened orders does not matter for the price movement, isn"t this contradictory ?

Because you said that the Depht of Market is important in order to understand in which direction the price could move

And what is the Depht of Market , if not the general size of opened sell / buy orders, in a given market ?

Depth of Market consists of pending orders, they have not been executed and there is no guarantee that they ever will be executed. Their size matter to understand the market sentiment, but they do not dictate the price. The price is based on the actually executed orders. Also, Depth of Market is not something constant - it changes constantly and rather quickly.

what do they usually do?

Frankly, I have little idea of how the institutional traders manipulate the price. I am not sure they do that at all. Especially, in stocks, where trading is centralized on exchanges and can be investigated.

I would like to understand their minds as much I can, in order to have more variable before entering into a trade

Maybe I am wrong, but it seems like you are trying to base your trading on rather far-fetched assumptions, which, even if true, give little value to trading decisions, because the Depth of Market available to traders does not offer any tools to differentiate between the manipulative orders and "normal" orders.

 

[lucacrebbe]

Depth of Market consists of pending orders, they have not been executed and there is no guarantee that they ever will be executed. Their size matter to understand the market sentiment, but they do not dictate the price. The price is based on the actually executed orders. Also, Depth of Market is not something constant - it changes constantly and rather quickly.



Frankly, I have little idea of how the institutional traders manipulate the price. I am not sure they do that at all. Especially, in stocks, where trading is centralized on exchanges and can be investigated.



Maybe I am wrong, but it seems like you are trying to base your trading on rather far-fetched assumptions, which, even if true, give little value to trading decisions, because the Depth of Market available to traders does not offer any tools to differentiate between the manipulative orders and "normal" orders.

Thank you, and sorry for all those questions

Can I ask you somenthing

why the Istogram of the Volume bars (usually below the candle graph), shows red or green volume bars, if the volume traded has no colour is neither bearish or bullish, but it is always the same for buyer and sellers?
(for every buyer there is a seller)

How do you interpretate red or green Volume Bars ?

 

[Enivid]

How do you interpretate red or green Volume Bars ?

Could you please show an example? All the charts I've seen with the color volume bars - they were just repeating the color of the price candles.

 

[lucacrebbe]

Could you please show an example? All the charts I've seen with the color volume bars - they were just repeating the color of the price candles.

Thanks, you have answered to my question, you are right, they have the same color of the candles they are referring to, so the colour of the Bars of the volume is not influent, doesn't matter... it only shows that there has been a downfall in the price, or an upside movement isn't it?

 

[Enivid]

it only shows that there has been a downfall in the price, or an upside movement isn't it?

Yes, that's right.