I think you’ll agree with me when I say:
Being able to tell if a market is bullish or bearish is very important.
So how can you tell if a candle is bullish or bearish? It’s actually quite easy.
In this post, I’m going to show you how you can easily answer those questions.
Let’s dive in.
How Can You Tell If a Candle Is Bullish or Bearish
If a candle closes at a lower price than its opening, it’s bearish, while a candle that closes at a higher price than its opening is bullish.
This can be made easier to read on a chart because you can see them visually in colours that you set too.
Most commonly, a bullish candle is set to green and a bearish candle is set to red.
Candlesticks are a great tool for measuring price movement and identifying trends, but they do not tell you what the trend is by itself, you need to see similar candlesticks form to create a trend bias over time.
You must first decide whether you think the candlestick is bullish or bearish before you can learn how to trade it.
A bearish candlestick indicates selling pressure.
A bullish candlestick indicates buying pressure.
This is what they can look like:
Notice the key difference here is where the open and close prices are.
How Can You Tell If a Candle Is Bullish?
The following four signs tell you whether a candlestick is bullish:
- The candle is close to the upper end of the price range
- The entire body is green (or whatever colour you choose for your bullish candle – mine is hollow with a black border).
- The candlestick is trending up
- A bullish candlestick will appear in the direction of the overall trend
It’s important to note that there are no hard and fast rules when it comes to candlesticks. There are no set rules as to what is considered a bullish or bearish candlestick, though there are commonly accepted characteristics that tend to accompany these candlestick types.
How Can You Tell If a Candle Is Bearish?
If you think the market is moving lower, you can use candlestick patterns to confirm this.
In candlestick charts, a bearish candle shows a lower high and a lower low. The body of the candlestick is coloured black and the shadow is white.
A bearish candlestick can occur before or after a major trend reversal. A bearish candlestick usually signals the end of a major trend.
The following four signs tell you whether a candlestick is bullish:
- The candle is close to the lower end of the price range
- The entire body is red (or the colour you choose for your bearish candle – mine is black)
- The candlestick is trending down
- A bearish candlestick will appear against the overall trend
What Colour Are Bullish Candles?
Bullish candles are normally shown as green candlesticks on retail trading terminals. However, this isn’t always the case.
Some people use blue, and white with a black border, or even use black candlesticks.
This depends on the user and how they prefer to read the charts.
Personally, I prefer a white candlestick with a black border as I feel that for me it is easier to read and focus on the patterns vs. what the actual candlestick is doing. Like so:
For me, green and red aren’t too appealing colours to focus on and they engage with the brains association of good and bad.
I want to keep my trading based on what I see – not based on the association of the colours.
When most people see red, it shouts out “danger”, which isn’t the case 99% of the time in trading.
It’s an opportunity.
So by nullifying the colours, it allows me to trade just as I want without any outside pattern interruptions.
What Colour Are Bearish Candles?
Bearish candles are more commonly shown as red on trading charts. Like bullish candles, you can also customise the colours to suit your preferences.
The most common colours for a bearish candle are red, black, and blue. Like so:
But again, your preference is how you should choose. You can change this on any retail trading platform like TradingView and MT4.
I use a black candlestick to highlight a bearish candlestick personally.
There are no right or wrong answers to this, it’s just preference.
Can a Bullish Candle Be Red?
A bullish candle can be red, or any other bearish colour you choose to have, as we see examples with the hammer pattern.
Although this isn’t the case often. Only specific patterns should be considered for this.
The hammer pattern is a reversal indicator that can appear both bullish and bearish. It just depends on whether the price closed above the open, or below, like this:
But what does this mean, if a bullish-looking candle is red?
(I’ve painted the candlestick half red and a half black to make it easier to visualise)
Well in the case of the hammer pattern, it just means that the buyers didn’t get the price high enough to close above the open during that session.
This could be interpreted in different ways:
Buyers came in and surged the price higher in the final moments of the trading session, reversing the selling pressure. This is a good indicator that the buy side will be aggressive, especially if this is around a demand zone.
Or, it could mean that the buyer strength seen in the trading session hasn’t got quite the velocity needed to take control yet. This means that there are signs to come a potential buyer’s push.
Either way, with the hammer pattern, regardless if it’s a red or green candlestick – there is a potential reversal happening.
Can a Bearish Candle Be Green?
Again, just like the bullish candle, most commonly it is not a green candle – but it can be under certain circumstances.
These are when candlesticks indicate a bearish reversal but don’t close below the open price.
The shooting star pattern is similar to the hammer pattern, but it is a bearish reversal signal, just like this:
It is common for this pattern to be either red or green (or bearish/bullish colours).
So if you see a shooting star candlestick pattern that is green, here is what it could mean:
Sellers entered the market and dropped the price lower in the final moments of the session, reversing the buying pressure. This is a good sign that the sell side will be aggressive, especially if this is around a supply zone.
Or, it could mean that the seller pressure generated in the trading session hasn’t got quite the power needed to take over yet. This means that there are signs to come a potential seller’s push.
Either way, with the shooting star pattern, regardless if it’s a red or green candlestick – there is a potential reversal happening.
How Can You Tell If a Candle Is Bullish or Bearish? Quite Easily Actually.
So how can you tell if a candle is bullish or bearish?
Many traders will tell you that knowing the difference between a bullish and bearish candlestick is incredibly difficult.
However, this is simply not true. In fact, the differences between each candlestick type are very easy to spot.
After reading this article, you will now understand how to identify them.
If you want to learn more about all candlestick patterns, read the following articles below: