Candlestick in gold trading

A candlestick displays four prices for a period: the body spans the open and close, and the wicks (shadows) extend to the high and low. A candle closing above its open is usually drawn green or white; below, red or black. Candlestick patterns, such as the pin bar (hammer or shooting star), the engulfing candle and the doji, describe the battle between buyers and sellers within one or two periods and are widely used as entry triggers at levels.

How it applies to gold trading

Gold’s long wicks make single-candle patterns both frequent and noisy. A 15-minute pin bar at a random price means little; the same candle at a daily support, after a liquidity sweep, with the close back inside the range, is a meaningful rejection. The rule most experienced gold traders follow is “level first, candle second”: the pattern is permission to enter at a place already identified, not a reason to find a place.

Candle timing matters too. Candles that close on the hour, at the London open or at the New York open carry more information than those closing at arbitrary minutes, because that is when participation changes.

A common mistake

Trading candlestick patterns on a chart whose session boundary is wrong. A daily candle that opens at midnight in a European time zone splits the New York session and distorts every daily pattern on gold.

See also: Swing high and swing low, Liquidity sweep, Support and resistance, Daily break.

Frequently asked questions