Using the default color settings for a candlestick chart, there are four possible combinations: a red filled candlestick, a red hollow candlestick, a black filled candlestick and a black hollow candlestick. SharpCharts users can also choose different colors for up and down candlesticks.
Let's first look at the colors. A candlestick is black when the last price is above the prior close. A candlestick is red when the last price is below the prior close. Using this color-coding, chartists can immediately see if prices closed up or down.
The hollow or filled aspect is determined by the relationship between the open and the close. A candlestick is hollow (white) when the close is above the open, which implies buying pressure after the open. Conversely, a candlestick is filled when the close is below the open, which indicates selling pressure after the open.
Red filled candlesticks and black hollow candlesticks are quite common. A red filled candlestick indicates selling pressure because prices moved lower after the open and the close was below the prior close. A black hollow candlestick indicates strong buying pressure because prices moved higher after the open and the close was above the prior close.
Red hollow candlesticks and black filled candlesticks are relatively rare. A red hollow candlestick forms when the close is above the open, but still below the prior close. A black filled candlestick forms when the close is below the open, but still above the prior close. Both types of candlesticks form after a gap, often a large gap, and they indicate that prices moved in the direction opposite the gap.