Let’s make it simple
When you walk past a tall tree, you may use it to remember where you are. An anchor candle can be a similar reference mark on a chart. It is not an anchor that physically holds the price in place.
Understand the idea
The supplied book uses "anchor candle" for a body that stands out as larger than nearby bodies. It is a reading heuristic, not a universally standardized rule. Choose it using only information visible at that moment.
Mark its open, close, high and low. Then observe later closes relative to those marks. A close below the open of an UP anchor challenges the earlier upward movement. It does not prove a new downtrend.
A pullback that stays above the anchor open can still become a bigger decline later. Avoid the false choice "crossed = certain reversal; not crossed = certain continuation." Both are too strong.
Read exact candle values
| Candle | Open | High | Low | Close |
|---|---|---|---|---|
| A | 20 | 29 | 19 | 28 |
| B | 28 | 29 | 25 | 26 |
| C | 26 | 27 | 22 | 23 |
| D | 23 | 24 | 18 | 19 |
A small worked example
An UP anchor opens at 20 and closes at 28. Later closes are 26 and 23: both are above 20. A close at 19 is below the anchor open. These are three observations, not three guaranteed trading instructions.
Your turn
Draw the anchor. Extend a dotted line from its open at 20. Plot later closes 26, 23 and 19. Describe when the line was crossed.
Compare your exercise with a model response
The final close 19 crosses below 20. The earlier closes 26 and 23 did not.
Pause & think
Check your understanding
Write an answer, then compare it with the explanation. This is self-study, not an automatically graded test.
Compare all three answers to unlock the review button.
Fictional examples. Education only; no pattern guarantees a result. Course information