Hollow candlesticks use colour and fill attributes to show price behaviour.
- When a candle is SOLID it means that the CURRENT closing price is lower than the same period’s open price.
- When a candle is HOLLOW it means that the CURRENT closing price is higher than the same period’s open price.
The candle’s colour compares current closing price to the previous candle’s closing price, so:
- Green candles mean that the current closing price is GREATER than the previous candle’s close price.
- Red candles mean that the current closing price is LOWER than the previous candle's closing price.
This is how hollow and solid (or filled) candlesticks usually look:
There is a lot of confusion when people ask the difference between a solid and a hollow candlestick, as the question itself makes you think that you are comparing a hollow or solid candle with a traditional candlestick chart where all the candles are solid.
Traditional candlestick charts (which are well covered in our technical analysis guide) are all solid and behave completely different from a solid candlestick in a hollow candlestick chart.
Let’s take a look at the new language of hollow candlestick charts to understand how it works:
Hollow Vs. Solid Candlesticks
The hollow or filled attribute in these candlesticks serves the purpose of showing if the current closing price of the candle is higher or lower than the same period’s open price.
Let’s not focus on the colour for a moment and just look at whether it’s filled or not:
If the candlestick is hollow as the one above, it means that the candlestick’s current closing price it’s GREATER than the candle’s open price, so we can think of it as a bullish candle.
Now here it’s where it gets tricky, in the candle above which looks just like a standard candlestick that we’ve seen before, the fact that its solid (filled) means something completely different, in this case it's telling us that the current closing price it’s LOWER than the candle’s open price.
Green Vs. Red Candles in hollow candlestick charts
In hollow candlestick charts, the colour attribute of the candle is determined by comparing the candle’s current closing price against the PREVIOUS candle’s closing price, let’s take a look at an example:
A red candlestick (regardless if it’s hollow or not) means that the closing price is LOWER than the previous candle’s closing price.
A green candlestick (regardless if it’s hollow or not) means that the closing price is GREATER than the previous candle’s closing price.
Examples of reading hollow candlesticks
Below you’ll see clear examples on hollow and solid candlesticks and what each attribute is telling us:
Hollow candlesticks give you a new way to see more information on a trading chart and to perceive when a bullish or bearish trend is forming based on a combination of hollow or filled candles and as you know, the more information we get when we trade then the better off are we!
The most important thing is not to confuse them with traditional candlestick charts as now we understand they behave differently.
Also, we would like to note that charting tools are very different across trading platforms, the same green candlesticks (hollow or not) can be black and the red one maintain it’s colour, it’s very important to check the differences in your chart's settings.
Visit our brokers section, open a free demo account with any of them and practise trading using hollow candlesticks.