How to be an Expert in Candle Stick Patterns? Top 16 Candle stick trading strategy
Introduction
Candlestick patterns are accustomed predict the future direction of price movement. Discover the top Notch common Candle Stick patterns and the way you'll use them to spot trading opportunities.
What is Candle Stick Patterns?
A candlestick is a manner of showing records approximately an asset’s rate movement. Candlestick charts are one of the maximum famous additives of technical analysis, allowing investors to interpret rate records speedy and from only some rate bars.
This article makes a speciality of a each day chart, in which every candlestick info a unmarried day’s trading. It has 3 fundamental features:
- The body that represents the opening and closing area.
- The wick or shadow that indicates the high and low points of the session.
- The color that indicates the direction of the market: green entities indicate price increases, red entities indicate price declines.
Over time, a single candlestick chart forms a pattern that traders can use to identify key support and resistance levels. There are a large number of candlestick patterns that indicate that there is an opportunity in the market; some people recommend striking a balance between buying and selling pressure, while others recommend continuing. Patterns or market indecision Before you start trading, it is important to understand the basic principles of candlestick patterns and how they affect your decision-making.
How to Practising reading Candle Sticks Patterns?
The best way to learn how to read candlestick patterns is to practice entering and exiting trades based on the signals they give. You can develop your skills in a risk-free environment by opening an Tradingview Paper Trading Account for free of Cost, or when you are confident enough to start trading, you can immediately open a free real Demat account with ALICEBLUE, UPSTOX, ZERODHA, ANGEL BROKING or BINANCE (Crypto trading Account)
When using candlestick patterns, it is important to remember that although they are great for predicting trends quickly, they should be used in conjunction with other forms of Technical analysis to confirm the overall trend.
Bullish Candle Stick Patterns
Bullish patterns might form when a market downtrend, associated signal a reversal of price movement. they're an indicator for traders to contemplate gap a protracted position to take advantage of any upward trajectory. There are Lots of candle stick formation but below Candle Stick patterns are used by professionals.1. Hammer
The hammer candlestick pattern is created of a short body with an extended lower wick, and is found at all-time low of a downward trend.
A hammer shows that though there have been selling pressures throughout the day, ultimately a powerful buying pressure drove the price back up. the color of the body will vary, however green hammers indicate a stronger bull market than red hammers.
2. Inverse Hammer
A equally bullish pattern is that the inverted hammer. the sole distinction being that the higher wick is long, whereas the lower wick is short.
It indicates a buying pressure, followed by a selling pressure that wasn't robust enough to drive the market value down. The inverse hammer suggests that buyers can soon have control of the market.
3. Bullish engulfing
The bullish engulfing pattern is made of 2 candlesticks. the primary candle may be a short red body that's utterly engulfed by a bigger green candle.
although the second day opens below the first, the bullish market pushes the price up, culminating in a clear win for buyers.
4. Piercing Line
The piercing line is additionally a two-stick pattern, created from an extended red candle, followed by a long green candle.
there's typically a big gap down between the primary candlestick’s closing worth, and therefore the green candlestick’s opening. It indicates a powerful buying pressure, because the price is pushed up to or on top of the mid-price of the previous day.
5. Morning Star
The morning star candle holder pattern is taken into account an indication of hope during a bleak market downtrend. it's a three-stick pattern: one short-bodied candle between an extended red and a long green. Traditionally, the ‘star’ can don't have any overlap with the longer bodies, because the market gaps each on open and close.
It signals that the selling pressure of the primary day is subsiding, and a bull market is on the horizon.
6. Three Green Soldiers
The Three Green soldiers pattern occurs over three days. It consists of consecutive long inexperienced Green candles with little wicks, that open and close increasingly more than the previous day.
it's a really sturdy optimistic signal that happens once a downtrend, and shows a gradual advance of buying pressure.
Bearish Candle Stick Patterns
Bearish candlestick patterns sometimes form when an uptrend, and signal a degree of resistance. significant pessimism concerning the market price typically causes traders to shut their long positions, and open a short position to require advantage of the falling price.
1. Hanging Man
The hanging man is that the bearish equivalent of a hammer; it's identical form however forms at the tip of an uptrend.
It indicates that there was a big sell-off throughout the day, but that buyers were ready to push the value up again. the big sell-off is usually seen as a sign that the bulls are losing management of the market.
2. Shooting Star
The shooting star is that the same form as the inverted hammer, however is created in an uptrend: it's atiny low lower body, and an extended higher wick.
Usually, the market can gap slightly higher on gap and rally to an intraday high before closing at a price simply higher than the open – sort of a star falling to the ground.
3. Bearish Engulfing
The shooting star is that the same form as the inverted hammer, however is created in an uptrend: it's atiny low lower body, and an extended higher wick.
Usually, the market can gap slightly higher on gap and rally to an intra-day high before closing at a price simply higher than the open – sort of a star falling to the ground.
4. Evening Star
The evening star is a three-candlestick pattern that's the equivalent of the bullish morning star. it's formed of a short candle sandwiched between a protracted green candle and an outsized red candlestick.
It indicates the reversal of an uptrend, and is especially robust once the third candlestick erases the gains of the primary candle.
5. Three Red Crows
The three Red crow candle pattern consists of three consecutive long red candles with short or nonexistent wicks. Each trading day opens at the same price as the previous day, but selling pressure will push down the price with each closing price. Traders interpret this pattern as the beginning of a downtrend because sellers have overtaken buyers for three consecutive business days.
6. Dark cloud cover
The dark cloud cover candlestick pattern indicates a bearish reversal-a dark cloud of optimism from the previous day. It consists of two candles: a red candle that opens above the previous green entity and closes below its center. This shows that the bears have taken over. A meeting that pushed prices down a lot. If the candle's wick is very short, it indicates that the downtrend is extremely important.
Four continuation candlestick patterns
When the candlestick pattern does not indicate a change in the market direction, it is called a continuation pattern. This can help traders identify periods of calm in the market when they observe market lags or neutral price changes.
1. Doji
When the opening and closing prices of the market are almost the same, the candle will resemble a cross or a plus sign: traders will have to look for shorts or non-existent entities with variable length wicks. This cross-star pattern mediates the battle between buyers and sellers and will not bring any net profit to either party. Only the doji is a neutral signal, but it can be found in the bullish morning star and bearish late star reversal patterns.
2. Spinning Top
The Spinning top candlestick pattern has a short body located between equal-length wicks. This pattern shows that the market’s indecision has not led to major changes in prices—the bulls have pushed prices up, and the bears have pushed prices down. It is usually interpreted as a period of consolidation or calm after a significant upward or downward trend. The top itself is a relatively favorable sign, but it can be interpreted as a sign of the future because the current market pressure is out of control.
3. Falling Three Ways
The three-way formation mode is used to predict the continuation of the current trend, whether it is bearish or bullish. The retrograde mode is called the three-inversion method. It consists of a long red entity and three small green entities and another red entity-all the green candles are in the bearish entity area, indicating to traders that the strength of the bulls is not enough to reverse the trend.
4. Rising Three Ways
For a bull market pattern called the three-bull candlestick pattern, the situation is just the opposite. It consists of three short shadows embedded in a series of two long shadows. This model shows traders that despite the pressure from sellers, buyers still control the market.
Conclusion
Before taking any positions from the above candle stick patterns one must know the trend/sentiment of the Market without the knowledge of the trend it can be risky to dive into the market without any probability.
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