Hollow Candle vs Filled Candle: Understanding Market Sentiment in Trading
Introduction
Hollow and filled candlestick charts provide visual insights into market sentiment and price action. When comparing Hollow Candle vs Filled Candle charts, it’s essential to note that unlike traditional candlesticks, hollow candles highlight momentum shifts more clearly, making them valuable for trend analysis and breakout confirmation.
What are Hollow and Filled Candles?
A hollow candle forms when the closing price is higher than the opening price (bullish candle). A filled candle forms when the closing price is lower than the opening price (bearish candle). This visualization helps traders identify momentum and trend strength.
How to Read Hollow and Filled Candles
1. Hollow Candles (Bullish Sentiment)
- Open price is lower than the close price → Buyers are in control.
- Long hollow candles indicate strong bullish momentum.
- Appears in uptrends or trend reversals.
2. Filled Candles (Bearish Sentiment)
- Open price is higher than the close price → Sellers dominate.
- Long filled candles suggest strong selling pressure.
- Appears in downtrends or trend reversals.
Key Differences Between Hollow and Filled Candles
| Feature | Hollow Candle (Bullish) | Filled Candle (Bearish) |
|---|---|---|
| Color | Usually white/green | Usually black/red |
| Meaning | Upward momentum | Downward momentum |
| Strength | Large hollow candle = strong uptrend | Large filled candle = strong downtrend |
| Confirmation | Often signals trend continuation or reversal | Confirms bearish strength |
Trading Strategies Using Hollow and Filled Candles
1. Trend Confirmation Strategy
- Hollow candles appearing in an uptrend confirm a strong bullish trend.
- Filled candles appearing in a downtrend confirm a strong bearish move.
2. Reversal Signal Strategy
- Hollow candle after a downtrend → Possible trend reversal (buy signal).
- Filled candle after an uptrend → Potential reversal (sell signal).
3. Hollow Candle with Volume Analysis
- High volume with a hollow candle → Strong bullish continuation.
- High volume with a filled candle → Strong bearish move.
Example of a Hollow Candle Trade
- A stock is in an uptrend, and a hollow candle forms after a pullback.
- The trader enters a long position, confirming momentum with volume and RSI.
- The price continues to rise, validating the trade.
Advantages of Hollow Candle Charts
- Clearer Trend Visualization: Hollow candles highlight momentum shifts better than traditional charts.
- Works in All Timeframes: Useful for day trading, swing trading, and long-term investing.
- Pairs Well with Indicators: Can be combined with RSI, MACD, and moving averages.
Limitations
- Not Always Reliable in Sideways Markets: May generate false signals during consolidation.
- Requires Confirmation with Other Indicators: Best used with volume and trend tools.
Conclusion
Hollow and filled candlestick charts provide valuable insights into market sentiment, momentum, and trend direction. By combining these with technical indicators, traders can improve accuracy and make better trading decisions.
