Colouring candles: Conventions and perception

In the olden days charts were kept by hand. Graph paper was usually white, though sometimes pale green was preferred as it is said to be easier on the eye. Sharpened pencils at the ready the working day started and ended with careful drawing of bars and candles, the ability to rub out mistakes and redraw lines an essential tool resulting in rather dull grey on greyish charts.

Then the publishing industry realised the outsized profits available from printing weekly journals and selling them to investors, bankers and stockbrokers. Interestingly they too tended to stick to the grey tones though increasingly fine black pen was used to update manually until the next edition arrived in the post.

Gilt yield

When computers and terminals caught up with technical analysis, they were often limited to a generic screen format of luminous green on a black background. Reuters’ FXFX page was one of the most widely used in treasury dealing rooms, with scrolling headlines along the bottom. Geek chic colour tones are still followed by Bloomberg, the range expanding to include a rather harsh orange and background colour gradations (popular in the Far East).

FTSE 100

Micex

Stockbrokers also got involved and based on their conventions introduced the idea of green and red candles depending on whether the share had rallied or slumped that day. This has subsequently been adopted by many in the spread betting and FX trading communities.

Apple

Research from investment houses and banks will often incorporate elements of their logo, font, and colour scheme into documents published, both online and in hardcopy. If properly handled this can make for a very attractive presentation. However, care in the colour choices should be made when using many lines on one chart, like say Ichimoku clouds, especially when overlaid with Fibonacci retracements and trend lines.

Above all when analysing the charts personal display preferences must not be allowed to interfere with the technical analysis itself.

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Posted in Finance, Markets, STA news, Technical Analysis, Trading, Trending
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One comment on “Colouring candles: Conventions and perception
  1. Clive Lambert says:

    Indeed it is, IMO, a shame that the “standard” these days seems to be Green = Up candles, Red = down candles, as this goes somewhat against the traditional colour scheme for candlesticks.

    I remember when I did a talk on the subject for the STA years ago Michael Feeney was in the audience which made me very nervous indeed as he was one of the people who, along with Steve Nison, originally introduced candlesticks to the Western world. Sure enough at the end of my talk his hand went up. “Here goes. What have I got wrong” I thought!

    In fact Mike was very complimentary about my presentation but he did point out that the original colour scheme in traditional candlestick analysis is Red for up candles and Black for down candles, as red is a lucky colour in the Far East.

    I tend to stick to talking about “open” and “filled” candles when teaching the subject, an open candle being bullish, filled candles bearish.

    I once had a mad thought of changing all my charts in my daily reports to the “old school” red/black format as a tip of the hat to tradition, but decided better of it as it would probably just confuse people!

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About Nicole Elliott

Nicole Elliott

A graduate of the London School of Economics and Political Science (BSc Social Psychology) Nicole Elliott has worked in banks in the City of London for the last 30 years. Whether in sales, trading or forecasting technical analysis has always been the bedrock of her thinking. Key expertise lies within all areas of treasury: foreign exchange, money markets, fixed income and commodities.

She has also added to the body of knowledge of the industry writing the first western book on Ichimoku Cloud Charts. Strong media links and a cult following are due to her prescient calls on the markets and often entertaining format.

Nicole can be contacted at trending@sta-uk.org

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