Hollow candles

If you open a modern charting app like TradingView, you will occasionally see a bizarre candle: it is outlined in Red, but its body is completely Hollow (empty inside, like a green candle usually is). Or conversely, it is Green, but completely Solid (filled in, like a red candle usually is).

How can a red candle be hollow? How can a day be "down" and "up" at the exact same time?

Traditional candlesticks only compare two numbers: Today's Open vs Today's Close. If Close > Open, the candle is Green. If Close < Open, the candle is Red.

But this ignores what happened yesterday.

Imagine a stock closed at ₹100 yesterday. Today, awful news breaks before the market opens, and the stock "gaps down", opening at ₹80. During the day, buyers step in and push it up to ₹90 by the close.

In a traditional candlestick chart, that candle is Green (Close of ₹90 > Open of ₹80). But the person holding the stock just lost ₹10 from yesterday! A bright green candle for a massive loss feels wrong.

Hollow candles solve this by separating the intraday action from the interday trend.

Hollow candles split the data into two separate visual cues: Color and Fill.

1. Color (Red/Green) now depends on Today's Close vs Yesterday's Close. It tells you the overall trend.
2. Fill (Hollow/Solid) now depends on Today's Close vs Today's Open. It tells you who won the intraday battle.

Interact with the playbook below to see how these conflicting signals create the four possible candle types.

Every price in this module is an illustrative example, not a real quote. [illustrative]

1. Hollow Green (The Best): Closed higher than yesterday (Green), and closed higher than it opened (Hollow). A powerful uptrend.
2. Solid Red (The Worst): Closed lower than yesterday (Red), and closed lower than it opened (Solid). A powerful downtrend.
3. Solid Green (The Gap Trap): It closed higher than yesterday (Green), but lower than it opened (Solid). It "gapped up" in the morning, but sellers immediately took control and pushed it down all day. The trend is up, but the intraday momentum is dead.
4. Hollow Red (The Buy-the-Dip): It closed lower than yesterday (Red), but higher than it opened (Hollow). It gapped down in the morning, but buyers stepped in and pushed it up all day. The trend is down, but the intraday momentum is surging.

Just like standard candlesticks, hollow candles cannot tell you the order of the High and Low. But they do add a slight cognitive burden: you now have to process two variables (Color and Fill) instead of just one.

The most common trap is misreading a Solid Green candle as a sign of strength. Because it is green, beginners assume the stock is doing well. But the Solid fill tells you that anyone who bought the stock at the opening bell is currently sitting on a loss. The green color only means the people who bought yesterday are in profit.

The trickier case is the opposite: a red candle whose body is hollow. Two honest readers can look at the exact same candle and disagree.

Before you trust the hollow body as a turn, ask: what would change your mind? If the next two or three candles close back below their opens and the colour stays Red, the intraday buying was noise and the downtrend read holds.

Hollow candles are a powerful upgrade to standard candlesticks because they factor in the previous day's close without needing a moving average line.

But what if you want to completely smooth out the chart? What if you want to erase the choppiness of the open and close entirely and just see the trend?

That brings us to the first of the "noise-filtering" charts: Heikin-Ashi.