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I am learning technical analysis and from what I understand for

red candles top body is open bottom body close green candle bottom body is open and top body is close.

Why don't adjacent candle's body align according to this shouldn't the red candle's bottom (closing price) align to the next green candle's bottom (opening price)?

enter image description here

Lightsout
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1 Answers1

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Some times there are gaps between the close of one period and the open of the next period.

This is most obvious when each candle represents the period of one day, as there could be news overnight when the market is closed, and then the next morning the open can gap up or down depending on whether the new is seen as good or bad.

These gaps can also happen during intra-day periods like hourly, or minute candles when some economic news might be released which might directly affect the company in question.

Also, stocks that a less frquently traded, that is they have low trading volume, tend to gap a lot more often than do stocks with higher trading volumes that are frequently traded.

Victor
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  • That is why I used 1 minute chart on purpose cause I would understand with daily chart and after hour news. So your saying the close of previous candle and open of next candle is not right after another for the 1 minute chart? – Lightsout May 05 '20 at 08:47
  • I have added another sentence to my answer explaining that stocks with low volume tend to gap more often. The chart you have included shows very little trading where all you have is a flat verticle line - meaning there was possibly only one trade if any during that one-minute interval. As an example - so during the 2-minute candles you have circled, there could have been continuous trades for the first 40 seconds of the first candle, then no trades for the next 40 seconds, the first trade in the next candle comes in 20 seconds into the minute and gaps up to a higher openning. – Victor May 05 '20 at 08:56