Why the candle close matters
A candle is not final until its timeframe is over. Within the candle, price can move beyond a zone and then come back. At the close the candle's four prices are fixed. That is why whether a zone has broken, or whether a candlestick pattern has formed, is judged on the close.
When is a candle final?
When a candle opens, only its open is known. As the candle runs, its high and low can extend and its last price changes with every trade. That is why the right-most candle on a chart keeps changing shape.
When the period is over, the last traded price becomes the close and the candle no longer changes. A long green body seen in the first hour of a 4H candle can turn into a small body and a long wick by the close.
The life of a candle
- The candle opens. The open is set. In crypto it is usually very close to the previous candle's close.
- Price moves within the candle. Price goes up and down; the high and low form along the way. The body's colour and size can change many times.
- The candle closes. When the period is over, the last price becomes the close. The candle's four prices are now fixed.
- The reading comes after the close. The candle's shape, its position relative to a zone and pattern definitions are all judged on the closed candle.
Within the candle versus the close
When price moves above a resistance zone within a candle, three different pictures can show at the close.
Held at the close
The candle closes above the zone's upper edge. The move seen within the candle is confirmed by the close.
Reversed by the close
Price closes back below the zone. Only a wick is left above it; this is the typical look of a false breakout.
Closes inside the zone
The close comes inside the band. The zone has been tested, but neither a breakout nor a rejection is clear yet.
Why the close is used as the measure
- It is fixed: once closed it does not change; the same candle looks the same to everyone.
- It shows the period's result: it measures where the period ended, not brief spikes within it.
- Definitions use it: candlestick patterns, breakouts and retests are defined on closed candles.
- It reduces noise: wicks record sudden, brief moves too; the close is less affected by them.
What it shows, what it does not prove
What it shows
- At what level price was accepted at the end of the period
- Whether a move seen within the candle held until the close
- Whether a zone was cleared on a closing basis
What it does not prove
- That the next candle will move the same way
- That a close on its own confirms a breakout or a reversal; the next candles matter too
- That the same result will show on other exchanges and other timeframes
The MarketLevelMap view
How it relates to zones
Whether a zone has been cleared is read from where the close sits relative to the zone, not from the most extreme price within the candle. Thinking of the zone as a band, a breakout is measured by a close beyond the band's far edge. A close inside the band only shows that the zone was tested.
A move that goes beyond the zone within the candle and comes back by the close is left as a wick on the chart. This picture is covered in detail on the false breakout page: the wick reaches beyond the zone, but the close stays behind it.
For general information only. Not investment advice.Last updated: