What is the Rickshaw Man
The rickshaw man is a type of candlestick, a price chart showing the high, low, opening and closing prices of a security for a certain period. More specifically, the rickshaw man is a type of long-legged doji, a shape that indicates indecision in the market, where the body can be found at or very near the middle of the candle.
BREAKING DOWN Rickshaw Man
The rickshaw man candle occurs when both bulls and bears control a security’s price at different times during a certain period. This disparity creates a wide trading range for the period, and therefore long shadows on the candle. Despite the significant volatility indicated by the rickshaw man, it does not point to clear directional movement, and the price closes very near its opening price.
The dynamics indicated by the rickshaw man suggest indecision in the market, but could send a signal to traders based on context. In some cases, the pattern may represent a period of consolidation, which could suggest the continuation of previous trends. In other cases, the pattern could indicate indecision at the end of a bullish run-up, which could suggest a market reversal. Traders with enough context may want to bet on a continuation or reversal, but in many cases traders may want to hold off on taking any positions until a clearer chart pattern emerges.
The Rickshaw Man as an Example of a Candlestick
The rickshaw man is an example of a candlestick, a price chart developed in Japan in the 18th century that reflects the impact of investor sentiment on security prices. The wide part of the candlestick is known as the real body. It indicates whether the closing price was higher or lower than the opening price, and is typically black and red if the stock closed lower, white and green if the stock closed higher. The lines that extend outward from the body are known as shadows, and they show the security's high and low prices and how they compare to the open and close. A stock that closes higher than its opening will be represented by a hollow candlestick, while a stock that closes lower than its opening will be represented by a filled candlestick. Technical analysists use candlesticks to determine when to enter and exit trades.
The rickshaw man, like all long-legged doji, indicates that the forces of supply and demand are nearing equilibrium. While the pattern can be used to represent a security's movement over any amount of time, longer-term charts with more participants contributing to its formation are generally more significant. When analysts use the rickshaw man with other technical indicators, they are more likely to pick up on reliable trading signals.