Candlesticks are Japanese method of technical analysis. It reflects the price movements of a security in graphical manner. Patterns occur during candlestick movement are useful for future price prediction.
Bullish / Bearish Engulfing, Bullish/ Bearish Piercing Line, DOJI,
- : Candle Stick analysis was first used by Japanese to trade rice. Later it was adopted by the western countries. It is mainly used for trading weekly. They can be used for analysis of short term. It is a simple and powerful analysis method. It is used to clearly understand the demand and supply. It is evaluated by marking the days opening and closing price which forms the body of the candle and the volume is indicated by the upper and lower tails.
- : Forecasting short duration ie, Daily to weekly basis. Useful for intra-day traders , weekly positional traders
- : Weekly trader can use the candle stick analysis and the significant volume change plays a role in candlestick analysis, since there are reversal patterns. Candle stick analysis can be used by a position trader.
- : After a significant rise or fall, when the previous day body is completely covered by today’s body with the reversal colour and significant volume, then it can be identified as engulfing pattern. Condition for Bearish engulfing: Increase in price trend observed for past few days & Latest Red body is covering the previous day green body with significant trading volume. When to Sell: Create short position when the price goes below latest red body’s lowest price(A). Stop loss:Latest Red body’s highest price(B), Risk =A~B.Target is A + Risk. Buying should happen at the target or at stoploss (price goes above B). Condition for bullish engulfing: Fall in price trend for few days observed & Latest green body is covering previous red body with significant volume. When to Buy: Create long position when the price goes above latest green body’s highest price(A). Stop Loss: Latest green body’s lowest price(B). Risk = A~B, Target is
- : When the latest body covers the low/50% of the previous body is piercing pattern, it appears very rarely & indicates reversal trend.conditions- *today's body should cover previous day's low or 50% mark. *the upper tail should be small. *the vol may increase. buying should take place in the highest point of both body and selling should be in the lowest of the covering body.
- : Doji means neutral , a doji is formed when the market opens and closes at the same level & it resembles like a star. a good doji appears very rarely, and easily you can make money by doji if you are spotting one.
- : Morning star appears after a dark night but gives a bright day. buy after the price crosses the highest price of the previous day. target is a+ 2 times of risk. Evening star – evening star is when after a bright day a star appears and then doji is seen which means negative things happen.
- : If the candlestick pattern resembles as hammer it indicates the bullish variant and as hanging man it is bearish variant, they appear very rarely but very powerful, the hammer should happen after a significant price fall in green colour, the colour ensures that the day got closed at the highest point. buy at the highest point of hammer and sell at its low tail point same applies for the hanging man.