What Is 'Short Line Candle'

Short Line Candles – also known as short candles – are candles on a candlestick chart that have a short real body. This one-bar pattern occurs when there is only a small difference between the opening price and the closing price over a given period. The length of the upper and lower shadows – representing the high and low for the period – do not make a difference in defining a short line candle. In other words, a short line candle may have a wide or narrow high and low range for the period but will always have a narrow open and close range.


Breaking Down 'Short Line Candle'

Candlestick charts are often used to assess positive or negative market sentiment at a glance. Short line candles generally signal that the market is consolidating with little price movement. But they may have different meanings, depending on where they occur in a price chart. For example, a short line candle may take the form of a hammer in which there is a lower tail with no upper tail. This is a bullish reversal pattern and could indicate the end of a downtrend. On the other hand, a series of short line candles could simply suggest indecision and provide traders with few hints about where future prices are headed.

A series of short line candles with narrow high and low range indicates a period of low volatility. When these candles are positioned near broader support or resistance, the cluster of candles often predicts the onset of high volatility, i.e. a series of wider range and directional candles consistent with a developing trend. While these clusters tend to be bullish near resistance and bearish near support, their directional value is limited. However, since they predict that high volatility will replace low volatility, traders can apply a basket of potentially profitable strategies.

For example, buying a security in the middle of a cluster at resistance will permit a tight stop loss due to the narrow range candles and even narrower real bodies. Reward to risk is favorable in this scenario because, if correct, the trader benefits from the new uptrend and if wrong, the incurred loss is relatively small. The cluster also benefits option traders who execute non-directional strategies that will generate profits from trend movement in either direction. This is possible due to the assumption that a high volatility directional move will result from the non-directional low volatility cluster.

  1. Three Inside Up/Down

    The three inside up and three inside down are three-candle reversal ...
  2. Three Outside Up/Down

    The three outside up and three outside down are three-candle ...
  3. Upside/Downside Gap Three Methods

    The gap three methods is a three-candle reversal pattern that ...
  4. Unique Three River

    The unique three river is a candlestick chart pattern that predicts ...
  5. On Neck Pattern

    On neck candlestick denotes a continuation pattern with a long ...
  6. Matching Low

    The matching low is a two-candle bullish reversal pattern that ...
Related Articles
  1. Financial Advisor

    Using Candles To Understand Market Behavior

    The conventional interpretation of candle charts focuses on the many different candle formations, but Dan Gramza shows how he uses candle charts to identify market behavior. This includes how ...
  2. Investing

    Tales From The Trenches: Location Is Everything

    When a candle pattern re-occurs near a moving average, it may indicate future support or resistance.
  3. Trading

    Heikin-Ashi: A Better Candlestick

    A valuable tool in technical analysis, Heikin-ashi charts smooth out the price action, and with candlestick charts can make it easier to spot trends and reversals when trading.
  4. Trading

    The Seven-Day Extension Fade

    It's possible to pick a top or bottom with no indicator support. We'll show you how this strategy works.
  5. Trading

    Heikin-Ashi: A Better Candlestick

    The Heikin-Ashi technique modifies the open-high-low-close series that most candlestick charts use, thus making trends easier to spot.
  6. Investing

    EUR/USD Catches a Bid From Major Support

    EUR/USD was under pressure in European trading but caught a bid after testing support from a horizontal level that has been in play since late May.
  7. Trading

    Candlesticks Light The Way To Logical Trading

    Crowd psychology is the reason this technique works. Find out how to make it work for you.
  8. Trading

    Two Candlestick Patterns Predicting A Bottom

    This article tries to find some bottoms in four stocks using two different candlestick patterns.
  9. Trading

    Tweezers Provide Short-Term Precision For Forex Traders

    Precise and short, the tweezer setup is similar to the more popular double top/bottom formations.
  10. Trading

    Significant Marubozu Candlesticks

    This candlestick pattern can signal a big move, especially if it occurs in the right context. With the context right and pattern present, some big name stocks could see a major move over the ...
  1. What are the most common Bearish patterns used by traders?

    Discover some of the commonly used bearish chart patterns that traders identify as potential market turning points to the ... Read Answer >>
  2. What do the different colored candlesticks mean?

    A typical candlestick chart is composed of a series of bars, known as candles, which vary in height and color. Read Answer >>
  3. What Do You Call a Candlestick With No Shadows?

    A candlestick with no shadow is seen as a strong signal of conviction by either buyers or sellers. Read Answer >>
  4. How are Shooting Star patterns interpret by analysts and traders?

    Learn what the shooting star candlestick formation is and the reasons traders and market analysts commonly interpret it as ... Read Answer >>
  5. What are the main differences between a Doji and a Spinning Top pattern?

    Identify the differences between doji candles and spinning tops on a candlestick chart, and learn how traders look at each ... Read Answer >>
  6. What is The Candle Maker's Petition?

    The 'Candle Maker's Petition' is a tariff by writer Frèdèric Bastiat, targeting government tariffs levied to protect domestic ... Read Answer >>
Trading Center