Candlestick charts are used by traders to determine possible price movement based on past patterns.
Candlesticks are useful when trading as they show four price points (open, close, high, and low) throughout the period of time the trader specifies.
Many algorithms are based on the same price information shown in candlestick charts.
Trading is often dictated by emotion, which can be read in candlestick charts.
- : Candlestick charts are used by traders to determine possible price movement based on past patterns. Candlesticks are useful when trading as they show four price points (open, close, high, and low) throughout the period of time the trader specifies. Candlesticks help traders to gauge the emotions surrounding a stock, or other assets, helping them make better predictions about where that stock might be headed. andlestick charts are used by traders to determine possible price movement based on past patterns. Candlesticks are useful when trading as they show four price points (open, close, high, and low) throughout the period of time the trader specifies.
- : Candlestick analysis can be used for weekly forecasting, i.e buying and selling within the week time. Candlestick analysis is very effective for a weekly forecasting and it is very useful tool for the positional traders. Forecasting can be done for 4-5 days using the candlestick pattern.
- : Candlestick charts are used by traders to determine possible price movement based on past patterns. Candlesticks are useful when trading as they show four price points (open, close, high, and low) throughout the period of time the trader specifies. The lower the trading volume, the skinnier the candlestick body. A higher-volume days result in wider candlestick. Chartists also plot volume at the bottom of a chart as a series of rectangles. A green volume bar is a higher-price trading session and a red bar is a lower-price trading session. In technical analysis, volume measures the number of a stock's shares that are traded on a stock exchange in a day or a period of time. Volume is important because it confirms trend directions. ... When a stock's price and volume increase, it indicates the buying interest in the stock. It shows the stock's uptrend.
- : Engulfing pattern, or engulfing candlestick pattern is a technical chart pattern that signals a potential reversal in the current market trend. These patterns are extremely important in price-action analysis, as engulfing patterns enable traders to enter the market, while anticipating the direction in which the market is likely to move. An engulfing candle pattern involves two candles, and the movement in the price of assets is shown graphically using a candlestick chart. An engulfing pattern is formed by using two candles, with the first candle “engulfed” by the second candle on the chart. Furthermore, in order to obtain a valid engulfing pattern, it is imperative that the first candle completely fits within the body of the next candle. If the engulfing candlestick pattern appears on the chart while the price is increasing, it suggests that a top might be forming, while the appearance of the engulfing pattern when the price is in downtrend suggests that a bottom might be forming. Based on where the engulfing candle forms in relation to the current market trend, there are two types of engulfing patterns: Bullish engulfing pattern and Bearish engulfing pattern. Bullish Engulfing Pattern A bullish engulfing pattern is a reversal pattern consisting of two candles, with the latter completely engulfing the first candle, regardless of the length of tail shadows. Furthermore, a bullish engulfing candle also gives the clearest signal when appearing in a downtrend, which suggests an uptick in buying pressure. A bullish engulfing pattern indicates the entry of more buyers into the market, thus driving up the price. It often triggers a reversal of the existing market trend. Traders generally enter long positions when the price opens lower than the previous low, and moves higher than the high of the second engulfing candle, which confirms the downtrend reversal. Bearish Engulfing Pattern A bearish engulfing pattern is the opposite of the bullish pattern, and provides the clearest signal when it appears during an uptrend. The pattern suggests an abatement of buying pressure, and an uptick in selling pressure. The pattern involves two candles, with an up candlestick engulfed by a large down candlestick. A bearish engulfing pattern indicates the entry of more sellers into the market, thus driving down the prices. Therefore, it often triggers a reversal of the existing market trend. In the image shown above, the candle being ‘engulfed’ is bullish, while the engulfing candle is bearish. The bearish engulfing pattern indicates that the selling pressure will overcome the buying pressure, with the market closing below the open of the day prior, predicting a reversal in the market trend.
- : A piercing pattern is a two-day, candlestick price pattern that marks a potential short-term reversal from a downward trend to an upward trend. The pattern includes the first day opening near the high and closing near the low with an average or larger-sized trading range. This candlestick pattern is used as an indicator to enter a long position or exit the sell position. Piercing pattern is formed when the bulls and bears, both are fighting to gain control over the prices. The body should cover the previous day's low, Today's body should cover at least 50% mark of previous body, The Upper tail should be small in size. we can create a long position if the body covers more than 50% of previous days bearish candle, provided a significant volume is noticed during the formation of piercing pattern.
- : A Doji is a unique pattern in a candlestick chart. It is characterized by having a small length, which indicates a small trading range. A Doji candlestick can take the form of a plus sign, a cross, or an inverted cross. In technical analysis, a Doji is an indication of a possible primary trend reversal during a time where there are high trading volumes in a particular direction. In technical analysis, a Doji is an indication of a possible primary trend reversal during a time when there are high trading volumes in a particular direction. In cases where the market has been in a downward trend and reaches a new low (which is lower than the last three trading days) and is not able to hold that low, there is a great likelihood that an uptrend can be expected in the days to come. Similarly, in cases where there has been an upward trend in the market, and the asset trades at a new high (in comparison to the last three trading days) and fails to hold the new high, there is a great likelihood that a downward trend can be expected in the days to come.
- : These patterns are indicative of a market’s top and bottom. While the evening star pattern is a three-bar candlestick pattern that typically occurs at market tops, the morning star pattern is seen when the market bottoms. The evening star is a strong indicator that a downward trend has started. The pattern typically forms over a three day period. On the first day, you will be able to see a large white candle indicative of sustained price rise; this will be followed by a smaller candle that shows a relatively smaller price rise. The third day will be a large red candle that opens at a price below the second day and then ends near the middle of the first day. The morning star pattern is the exact opposite of the evening star pattern. It appears in a downtrend indicating the trend reversal. For a morning star, the first candle is a red candlestick, followed by a small one, which is called a start, and then a large white candle. Both stars indicate a strong trend reversal. But these may not be indicative enough when studied in isolation. Like other candlesticks, evening star candlestick must converge with other technical charts for confirmation.
- : Hammer Candlestick: Traders in the financial markets often make use of candlesticks as a great visual aid to analyse and monitor what a particular price has done within a certain time period. Candlestick patterns are the most flexible technical indicators to understand the market movements. The patterns can help traders gauge market sentiment for a certain financial asset. For instance, a hammer candlestick is a bullish pattern formed when the price of an asset declines from its opening price, reaching close to the support level, only to bounce back to close at a high. Talking of bullish candlesticks, a popular pattern is the hammer candlestick formation. A hammer is one of the more important reversal patterns that traders should be aware of. The hammer is treated as a bullish reversal, but only when it appears under certain conditions. The pattern normally forms near the bottom of downtrends, indicating that the market is attempting to define a bottom. What is Hammer Candlestick?: The hammer candlestick is found at the bottom of a downtrend and signals a potential (bullish) reversal in the market. A hammer is a candlestick pattern, when a stock opens then moves a lot lower during the day then rallies back near the opening price. The candlestick pattern looks like a hammer with the long lower wick from the lows of the day looking like the handle and the opening and closing price body form what looks like the hammer’s head. The lower wick is usually twice the size of the candle body but can be even bigger. A bullish Hammer candlestick is formed when the high and the close are the same and it is considered a stronger formation because the bulls were able to reject the bears completely plus the bulls were able to push the price even more before the opening price. The long lower shadow of the Hammer indicates that the market tested to find where support and demand were located. When the market found the support area, the lows of the day, bulls began to push prices higher, near the opening price. Thus, the bearish advance downward was rejected by the bulls. Inverted Hammer The Inverted Hammer candlestick formation occurs mainly at the bottom of downtrends and can act as a warning of a potential reversal upward. It is important to note that the Inverted pattern is a warning of potential price change, not a signal, in and of itself, to buy. The Inverted Hammer formation, just like the Shooting Star formation, is created when the open, low, and close are roughly the same price. Also, there is a long upper shadow, which should be at least twice the length of the real body. When the low and the open are the same, a bullish Inverted Hammer candlestick is formed and it is considered a stronger bullish sign. After a long downtrend, the formation of an Inverted Hammer is bullish because prices hesitated their move downward by increasing significantly during the day. Nevertheless, sellers came back into the stock, future, or currency and pushed prices back near the open, but the fact that prices were able to increase significantly shows that bulls are testing the power of the bears. What happens on the next day after the Inverted Hammer pattern is what gives traders an idea as to whether or not prices will go higher or lower.