candlestick analysis and its different types
- : Candlestick analysis gives us a detailed study of the open and close price also the high and low price and the colorful representation makes us easy to read and understand. It is very effective as a daily basis and also more effective in weekly basis. Evaluation using candlestick is more effective to predict for a short term like a weeks time.
- : the general forecasting duration is generally a time period of a week
- : Candlesticks are used for a short term trader and it usually shows the reversal pattern. Volume with candlestick is very effective and confirms the movement direction
- : Engulfing pattern: Bullish: It is a reversal pattern after a recent price fall. The green body of the engulfing pattern should cover the entire previous day body. Increase in the volume is expected. Buy: when the price goes above the previous high and stop loss when it goes below the previous low. reward = risk taken Bearish: It is a reversal pattern after a recent increase in price. The red body of the engulfing pattern should cover the entire previous day body. Increase in the volume is expected. Sell: when the price goes below the previous low and stop loss above the previous high
- : Piercing pattern is in candle stick method.After continuous bearish trend,a trend reversal appears ,It shows the Bullish trend. 1.If the body covers the previous day’s low . 2.Volume should be more. 3.Upper tail of the present day should be low. If the green body pierces the red and the volume is high we have to buy and vice versa.
- : DOJI means neutral and it is a powerful and reliable candlestick pattern. DOJI appears after significant rise or fall in price with high volume. This candlestick pattern will be in the form of star, where the starting and ending price of the day is almost the same. DOJI is the indication of reversal trend and can be used for creating long/short position based on whether it is bullish or bearish.
- : Doji or the Star is a reversal pattern after a bullish or a bearish trend and it is neutral. In doji the open the close price remains to be almost same. high volume should be encountered. Morning star appears after dark night which is a sign of bullish and can be bought above the days high and stop loss below the days low. Evening star appears after a bright day which is a sign of bearish and can be sold below the days low and stop loss above the days high.
- : Hammer and hanging man patterns are very reliable and powerful, appears rarely and shows the reversal in trend, hence it is popular. Hammer: It appears after significant price fall. Lower tail should be at least 2 times of the body and upper tail should be very small and body should be green with high volume. When to Buy: Long position can be created when the price increases above the upper tail(A) and stop loss is the lowest price of hammer(B). Risk = A~B, Target: A+ (1.5 or 2 times of risk). Selling should happen when price reaches the target or at stop loss(price goes below B). Hanging Man: It appears after significant increase in price. Upper tail should be atleast 2 times of the body and lower tail should be invisible or small. Body should be red with high volume on that day. When to Sell: Short position can be created when the price goes below the lower tail(A) and stop loss is the highest price of the hanging man(B). Risk = A~B; Target: A+(1.5 to 2 times of risk). Buying should happen when the price reaching the target or at stop loss(price goes above B).