Some traders swear by the candle wick while others stick to the bodies. Truth is both have their place…
Distinguishing between the wick of the candle and the body is extremely important in forex trading. Generally speaking, the strength of a move is determined by the extent of the candle body. For example, dojis generally signify a weakening trend and indecision, signified by the inability of either the bulls or the bears to push price very far in either direction:
A succession of small candles including many dojis
signifying indecision prior to a breakout.
On the other hand, long candle bodies tell us that the sentiment is stronger than usual. A long bullish candle shows the bulls in control, and vice versa:
Price breaks above a level of indecisive dojis
with strong blunt ended candles
In the same way the wick of the candle can tell us a lot about the strength of a move. Short wicks attached to a long body add to the signals strength. Some of the candles in the example above are blunt ended, some have very short wicks. It adds to the strength of the signal that the bodies far outweigh the wicks in size. This shows strength in the move, and also that consensus about price has been reached within the time frame of the candle, with few traders willing to push price beyond these boundaries.
Now have a look at the indecision in these following doji patterns, with long wicks:
Plenty of volatility but failure of either bears or bulls
to establish direction, as shown by the forest of long wicks
There are also certain circumstances where we use specifically the candle wick. Perfect examples are the Tweezer Bottom and Tweezer Top candlestick patterns. In these patterns, we use the wicks to determine the signal.
In most other circumstances traders are divided as to whether to use the wicks or the candle ends. For the most part I prefer to use the bodies of the candle, that is I generally place more emphasis on the open and close values. However, there are certain circumstances where I use a combination of the body and the wick to determine a signal.
One of these situations involves double tops and double bottoms. For a double top I will use the bodies of the candle in the first extent reached by price, and if price wicks to or through this level subsequently I will deem this to be a double top pattern. Here is an example of using this method to define a double top, with the bodies at the left signalling a possible double top and the wicks to the right spiking through this level to give confirmation:
Double top candlestick pattern
using wicks for confirmation
And here is an example of using this method to define a double bottom. Once more I use consecutive body ends to signal a possible bottom forming, confirmed by a candle spiking through this level at the right:
Double bottom candlestick pattern
using wicks for confirmation
This is only one view of how to use wicks and bodies to determine double tops and double bottoms. It gives a lot more entries than using strictly the candle bodies, at the cost of slightly increased risk, perhaps. At any rate, it certainly works!
You may also be interested in using some of the lesser known patterns in your candlestick trading, such as the Dark Cloud Cover Candlestick