Candlesticks chart is a technical tool in the stock market that encapsulates data in a single candle for all time frames. This makes them more useful than simple lines and other charts. Candlesticks combine the open, high, low, and close of a candle to create patterns that predict the price direction once completed. For the most part, candlestick patterns are about market changes, if You can understand the pattern, so you can benefit from it. The value of candlestick patterns is an important topic for the stock market to capture trading opportunities, but there have been statistical studies on the accuracy of technical analysis and the results are very reassuring. Not all candlestick patterns work equally well. Their huge popularity has brought down the credibility. Some institutional traders take advantage of the algorithms of candlestick patterns to lure small traders.
here are some popular and useful patterns to keep an eye on.
There are mainly two types of candlestick patterns.
1* Reversal Candlestick Pattern
2* Continuation Candlestick Patterns
What are reversal candlestick patterns?
Patterns that form at the end of a long uptrend and downtrend, or indicate the end of a said trend, are some of the important Reversal patterns.
1* Bullish Reversal Candlestick Pattern:
Bullish engulfing candlestick patterns:
The Bullish Engulfing pattern is considered to be a very strong and simple reversible pattern as it involves only two candles. The premise behind this is that when the market is falling below a long downtrend, as indicated earlier by a candlestick. However, the market then changes direction and engraves the first candle within the second candle. This shows a change in sentimentality.
In the bullish engulfing pattern, the second candle completely encapsulates the first candle, or the body of the second candle is more than or twice the body of the first candle but is bullish. In this pattern, the first candle is the bearish candle and the second candle is the long bullish candle. After this pattern is formed, the possibility of the downtrend in the chart ends.
How to Confirm Bullish Candlestick Patterns.
In this pattern, the first candle should be a small bearish candle and the second long bullish candle, second candle should open gap up and close above the previous candle high and the volume of the second candle should be higher than the volume of the first candle or the volume should be in increasing order.
In Bullish engulfing pattern, the first candle may be Doji and Hammer and the second candle may also be Bullish Morubazu.
Morning Star Candlestick Pattern:
Morning star candlestick pattern is also a bullish candlestick pattern that is formed after the long downtrend. This pattern consists of three candles in which the first candle is the long bearish candle, the second candle is the short candle and the third candle is the long bullish candle.
* The first candle in this pattern is the long bear candle, with vendors dominating the market.
* The shadow at the top and bottom of the second candle is equal and this candle can be of any color which is called a star.
* The third candle is a long bullish candle and should open gap up.
How to confirm the pattern:
* In this pattern, the second candle should open gap down and the third candle should open gap up.
* In this pattern, the volume of the second candle must be greater than the volume of the first candle and the volume of the third candle must be greater than the volume of the second candle.
* Now in this pattern, after the third candle, which is formed after the third candle should open above the high of the third candle and after crossing the pattern high indicates the purchase signal in the market.
Bullish Harami Candlestick Pattern:
The Bullish Harami pattern is made up of two words, the first is the Bullish ie Boom and the second is a Japanese word which means a pregnant woman because this pattern is something like this. This candlestick pattern indicates that now the trend of recession in the market is over and the boom is about to begin.
This pattern consists of two candles in which the first candle is the long bearish candle and the second candle is the small bullish candle. This pattern is always followed by a long downtrend in the chart.
How does a Bullish Harami Pattern confirm:
* In this pattern, the first candle should long bearish candle and the second candle should open gap up from the first candle and trade between the first candle and close below the first candle open.
* Volume is very important in the Bullish harami candlestick pattern, in which the volume of the second candle should be greater than the volume of the first candle. But sometimes even low volume gives good results
* The first bearish candle in this pattern may also be the Morubazu candle.
* smaller the second candle, the stronger the pattern.
* After the formation of the Bullish bastard pattern, the next candlestick indicates a purchase when it is open and closed rapidly.
* After this candlestick pattern is formed, the buyer’s hold in the market becomes stronger.
Bullish abandoned baby:
This pattern is made up of three words. It is a candlestick pattern to show the fast. It means that now the recession is over and the market shows a rapid boom.
* In this pattern, the first candle is a long bearish candle and the second candle is a small Doji candle, and the third candle is a long bullish candle, this pattern is always formed after a long slump, the probability of a spell after this pattern is formed. It ends and you can buy after getting confirmation.
* In this pattern, the second candle gap should be open and the third candle gap should be open, and the third candle should not break the high of the first candle.
* Volume is very important in the bullish abandoned baby candlestick pattern, in this the volume of the third candle should be more than the volume of the first candle, the volume in the second candle is not so important.
* The first and third candles in the bullish abandoned baby candlestick pattern may also be the Morubazu candle.
* Breeding of the first candle is very important to make purchases in the bullish abandoned baby candlestick pattern when the candle does not break the high, you cannot buy. This may be a false signal.
Tweezer Bottom Candlestick Pattern:
The tweezer bottom candlestick pattern is also a bullish reversal pattern that takes place after a long bearish trend and eliminates the possibility of a slowdown and indicates an upcoming uptrend.
* Tweezer bottom candlestick pattern consists of first candle bearish candle and second candle bullish candle and these candles can be any type of candle.
* In this pattern the low of both candles is equal. And the volume of the first candle is less than the volume of the second candle. for trade confirmation, the third candle should be open higher and close above the high of the previous candle
FAQ ON CANDLESTICK PATTERN:
Which candlestick pattern is bullish?
What is bullish and bearish candle?
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