CandleStick Patterns
Way to Read Charts !
This page gives the description of the various candlestick patterns needed to be successful in market.
Bullish patterns in candlestick charting indicate that the market sentiment is becoming increasingly optimistic and the price is likely to rise. Here is an explanation of each of the bullish patterns listed:
1. Hammer: A hammer is a single candlestick pattern that forms when the price moves significantly lower after the opening but then rallies to close well above the low. The long lower shadow suggests that the bears were in control during the session but the bulls stepped in to drive the price higher.
2. Inverted Hammer: The inverted hammer is similar to the hammer, but it occurs during a downtrend. It signals that the bears may be losing control and a potential price reversal is imminent.
3. Shooting Star: A shooting star is a bearish reversal pattern that forms when a small real body is found near the low of the day with a long upper shadow. This pattern indicates that the price opened high, traded higher, but then closed near the low, suggesting that the bulls were unable to sustain the momentum.
4. Bullish Engulfing: A bullish engulfing pattern occurs when a small red candlestick is followed by a large green candlestick, which completely engulfs the previous day's candle. This pattern suggests that the bears were in control initially, but the bulls took
over and drove the price higher.
5. Morning Star: A morning star is a three-candle pattern that signals a potential price reversal after a downtrend. The first candle is a long red candle, the second is a small real body (either red or green), and the third is a long green candle. The pattern suggests that the bears are losing momentum and the bulls are gaining control.
It's important to remember that while these patterns can be useful in indicating a potential change in price direction, they should be used in conjunction with other technical and fundamental analysis before making any trading decisions.
Bearish patterns:
1. Bearish patterns indicate a potential price decline and are often seen as a signal for selling or shorting an asset. The following are some commonly recognized bearish candlestick patterns:
2. Hanging Man: This pattern forms when there is a small real body (black or white) near the top of an uptrend with a long lower shadow. It suggests that there may be potential for a trend reversal to the downside.
3. Dark Cloud Cover: This pattern forms when a long white real body is followed by a black real body that opens above the previous day's high and closes well into the previous day's white real body. This pattern suggests that a bearish reversal may occur.
4. Falling Star: This pattern forms when a small real body is found near the top of an uptrend with a long upper shadow and little or no lower shadow. This pattern suggests that the bears are taking control of the market and that the price may decline.
5. Evening Star: This pattern forms when there is a small real body (white or black) followed by a large real body (black) after a prolonged uptrend. The real body of the second candle should completely engulf the body of the first candle and the gap between the two candles should be bearish. This pattern suggests that the uptrend may be over and that the price may decline.
As with all candlestick patterns, it's important to consider bearish patterns in the context of the larger trend and other technical and fundamental factors.