Part 36 Candlestick Wicks Shadows: Psychology & Trading Strategies
Part 36 Candlestick Wicks Shadows: Psychology & Trading Strategies
Candlesticks in the Stock Market: Focus on Wicks (Shadows)
Candlestick charts are a visual tool in technical analysis that originated in 18th-century Japan for rice trading. Each "candle" represents a specific time period (e.g., 1 day, 1 hour) and shows four key price points:
Open (start price), High (peak), Low (trough), and Close (end price).
For any given period – which could be for instance a minute, an hour, a day, week or month – Japanese candlesticks tell you pictorially where the market opened as well as its high, low and close.
The body (thick rectangle) illustrates the range between open and close—green/red for bullish/bearish.
If the closing price is higher than the opening price
the candlestick is bullish .
Most trading platforms display bullish candles in green but color can be customized
If the closing price is lower than the opening price , the candlestick is bearish
Bearish candles are shown in red but its not strict rule .
But the real intrigue lies in the wicks (also called shadows or tails), which extend from the body to the high and low.
These thin lines reveal intraday battles between buyers (bulls) and sellers (bears), often more telling than the body itself.
Candlestick wicks—also called shadows—are powerful psychological footprints in stock market charts.
They reveal the emotional tug-of-war between buyers and sellers, and when decoded properly, they can become high-conviction trade triggers.
Candlestick wicks (shadows) reveal critical information about price rejection and market sentiment.
Why Wicks Are Important
Wicks aren't just noise; they pinpoint support/resistance zones where price bounced or stalled.
In volatile markets (e.g., post-earnings or news events), long wicks reveal hidden liquidity traps or institutional order flow.
Short wicks confirm trend strength, while big ones flag potential traps for retail traders chasing breakouts.
Ignoring wicks is like reading a book without footnotes—you miss the subtext.
Here's a breakdown tailored for your clarity doctrine:
Anatomy of a Candlestick
Each candlestick has:
Body:
The range between open and close.
Represents the open/close range.
Long Bodies indicate strong buying or selling pressure.
A bullish candlestick with a long body means buyers controlled the market during that period.
A bearish candlestick with a long body shows sellers dominated the market during that period .
Short or small bodies - suggest weak price movement
Upper wick (shadow):
The high beyond the body—shows price was pushed up but rejected.
High price rejected by sellers.
The line above the body, from the top of the body (higher of open/close) to the session's High.
It shows how high buyers pushed the price before sellers rejected it and drove it back down.
Lower wick (shadow):
The low beyond the body—shows price was pushed down but rejected.
Low price rejected by buyers.
The line below the body, from the bottom of the body (lower of open/close) to the session's Low.
It indicates how low sellers dragged the price before buyers stepped in and rejected further downside.
Wicks highlight rejection levels—prices tested but not sustained—acting like "scars" on the chart where the market said "no" to further movement.
Long upper wick -
Sellers rejected higher prices
FOMO trap, reversal signal
Buyers pushed price up, but sellers dominated → Resistance signal.
Examples - Shooting Star, Gravestone Doji
Long lower wick -
Buyers defended lower prices
Panic flush, reversal setup
Sellers drove price down, but buyers reversed → Support signal.
Examples - Hammer, Dragonfly Doji
small wicks -
Stable price action
Low volatility, indecision
Price consolidated near open/close → Indecision or weak momentum.
examples - Spinning Top
No wicks -
Full conviction candle
Strong momentum, no rejection
Strong directional move (e.g., Marubozu candle).
examples - Bullish/Bearish Marubozu
Wick-Based Patterns:
Hammer (Long Lower Wick, Small Body):
Bullish reversal at downtrend bottom. Trade: Buy on next candle's upside confirmation.
Forms after a downtrend → bullish reversal.
Psychology: Sellers failed to sustain lows; buyers regained control.
Shooting Star (Long Upper Wick, Small Body):
Bearish reversal at uptrend top. Trade: Short on downside break.
Forms after an uptrend → bearish reversal.
Psychology: Buyers lost momentum; sellers took over.
Doji with Long Wicks: High indecision; avoid or wait for breakout.
The Psychology Behind Wicks
Wicks capture the emotional pulse of the market: fear, greed, and FOMO (fear of missing out).
Here's the mindset breakdown:
Long Upper Wick: Greed peaks—
buyers pile in on a breakout, pushing to new highs, but sellers (often smart money like institutions) dump in, slamming the price back. Psychology: "Euphoria turns to panic." Bulls feel trapped; bears smell blood. This rejection builds overhead resistance.
Long Lower Wick:
Fear surges—sellers panic-sell, cratering the price, but buyers (value hunters) swarm the "bargain" low, bidding it up. Psychology: "Despair flips to relief." Bears get shaken out; bulls gain confidence.
This creates underlying support.
Small/No Wicks (Marubozu):
Confidence reigns. No rejection means one side steamrolled the other—pure trend fuel. Psychology: "Unwavering momentum; no second-guessing."
Big Wicks Overall:
Indecision city. Price "fakes out" traders (e.g., a wick beyond a trendline lures chasers, then reverses).
Psychology: "Traps and mind games." Long wicks often precede volatility spikes, as they expose stop-loss clusters.
In essence, wicks are the market's "lie detector"—they show failed attempts, revealing where sentiment shifted mid-session.
As one trader put it, "Wicks are shadows of the fight; they tell you where price tried to go but failed to stay.
"How to Trade on Wicks: Strategies and Tips
Trading wicks is about fading rejections (betting against the wick's direction) or using them for entries.
Always confirm with volume, trends, and other indicators (e.g., RSI for overbought/oversold).
Risk management: Stop-loss beyond the wick's extreme; target 1:2 risk-reward.
Wick Rejection Trades (Scalping/Day Trading):Long Upper Wick at Resistance: Enter short (sell) if price closes below the body after a big upper wick—sellers won the battle.
Example: Price spikes to Rs.105 (wick high) but closes at Rs.100; short with stop above Rs.105, target prior support.
Long Lower Wick at Support:
Enter long (buy) on close above body—buyers defended.
Psychology play: Bears capitulated. Example: Dips to Rs.90 (wick low) but closes Rs.95; buy with stop below Rs. 90.
Advanced: Wick Clusters and Liquidity Grabs:
Watch for "wick clusters" (multiple candles with wicks at same level)—prime support/resistance. Institutions "hunt stops" by pushing into wicks to trigger retail exits, then reverse.
Big Wick in Trends: Fade it if counter-trend (e.g., long lower wick in uptrend = dip buy). Use 1-5 min charts for intraday.
Wicks reflect failed attempts to move price. Use them to identify where the market is likely to reverse or consolidate!
In the coming articles, I will be writing in-depth modules on single, double, and triple candlestick patterns—each compressed into clarity-grade overlays.
These will decode wick psychology, emotional slope tagging, and conviction logic
Single Candlestick Pattern -
Suggested Reading -
