Candlestick is a very simple and yet powerful way of analyzing price movement. There are various types of patterns – Engulfing, Piercing, DOJI and Hammer/Hanging man. Using these analysis one can create positions that are good for about a week or so
- : Candlestick pattern is evolved from Japan and can be very use full in analyzing short term trend
- : Forecasting can be done for 4-5 days using the candlestick pattern.
- : candlesticks should be used by weekly traders. volume plays an important role as higher the volume will confirm more participants and more stronger the moves.
- : engulfing pattern is simple and reliable pattern, its reversal pattern good for weekly trades. bullish engulfing – latest green body should cover the previous days red body completely, trading volume might increase, the bullish engulfing should appear after a price fall. buy when you see the price crossing the engulfing days high, profit will be risk taken. bearish engulfing – red body should cover the previous days green body completely, trading volume might increase, the bearish engulfing should appear after a rise in prices, sell when the prices crosses the previous days low.
- : In the candlestick view, after significant fall, when the current day starts below previous day’s lowest point and cover up more than 50% of previous day’s body with green colour and significant volume indicates the Piercing Pattern(Bullish in this case). Condition to qualify bearish piercing: Increase in price trend observed for past few days. Latest Red body starts above the highest of previous day and covers more than 50% of previous day’s body with significant volume. The lower tail is small in size. Condition to quality bullish piercing: Recent price fall trend observed & Latest Green body starts below the lowest of previous day and covers more than 50% of the previous day’s body with significant volume. The upper tail should be small..
- : 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
- : Bullish and Bearish DOJI is called as morning and evening star by western. the star should be seen after rally and not at sideways. Star indicates the reversal pattern. Morning Star: After significant price fall, if DOJI(starting and ending price is almost same at the center) appears with green body and high volume, it can be identified as morning start. Evening Star: After significant increase in price if DOJI(thin body) appears with red body and high volume, it can be identified as evening star
- : Hammer- When there is a continuous fall in trend then a body is formed with lower tail is two times its body, greenish and the upper tail is little visible or not visible then it is called Hammer and it is a bullish. Hanging man-When there is bullish, then a red body is formed with upper tail is taller with two times its body and redish and lower tail is not visible or little visible then it is a Hanging man (reversal of Hammer). In both the cases volume is high, when these patterns form.