Understanding Hollow Candles

Why do I use hollow candles & not traditional Japanese candlesticks?

Are hollow candles just a cosmetic change, or do they provide us with some extra information that a traditional candlestick doesn’t?

Traditional Japanese candlesticks are all solid. They are either green or red (colors may vary, but you get the point).

Hollow candles use two attributes to provide information regarding the price:
- Color of the candle
- Whether the body of the candle is filled or not

So, a green hollow candle can have its close > open (just like traditional candlesticks), or its open > close (here its body will be filled). Similarly, a red hollow candle can have its open > close (just like traditional candlesticks), or its close > open (here its body will be hollow).

The colour of a hollow candle is decided by comparing the closing price of the current candle with that of the previous candle. For example, a red-colored candle (irrespective of whether it’s filled or not) means that the current candle’s close is lower than the previous candle’s close.

The fill of a hollow candle is decided by comparing the close of the current candle with the open of the current candle. For example, an empty or hollow candle with the body not filled (irrespective of whether it’s red or green) means that the current candle’s close is greater than the current open.

Combining the fill of the body & the candle color, we get 4 different combinations for the same candle, while in traditional Japanese candlesticks, we get only 2 combinations.

Hope this post helps you get the advantages of using hollow candles in place of traditional solid candles.