Thanks to visit codestin.com
Credit goes to www.scribd.com

100% found this document useful (1 vote)
661 views16 pages

Candle Patterns

1. A candlestick is a chart that displays information about an asset's price movement over a period of time through features like the body, wick, and color. 2. The document outlines six bullish and six bearish basic candlestick patterns that can indicate changes in market trends. Bullish patterns may signal an upward price movement, while bearish patterns often form after an uptrend and may signal a reversal. 3. Common bullish patterns include hammers, inverted hammers, bullish engulfings, and morning stars. Common bearish patterns include hanging men, shooting stars, bearish engulfings, and evening stars. Candlestick patterns help traders identify potential opportunities.

Uploaded by

jai vanamala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
100% found this document useful (1 vote)
661 views16 pages

Candle Patterns

1. A candlestick is a chart that displays information about an asset's price movement over a period of time through features like the body, wick, and color. 2. The document outlines six bullish and six bearish basic candlestick patterns that can indicate changes in market trends. Bullish patterns may signal an upward price movement, while bearish patterns often form after an uptrend and may signal a reversal. 3. Common bullish patterns include hammers, inverted hammers, bullish engulfings, and morning stars. Common bearish patterns include hanging men, shooting stars, bearish engulfings, and evening stars. Candlestick patterns help traders identify potential opportunities.

Uploaded by

jai vanamala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 16

RIO PTM

CANDLESTICKS
What is a Candlestick?

A candlestick is a way of displaying information about an


asset’s price movement. Candlestick charts are one of
the most popular components of technical analysis,
enabling traders to interpret price information quickly
and from just a few price bars.

It has three basic features:

1. The BODY, which represents the open-to-close range

2. The WICK, or SHADOW, that indicates the intra-day


high and low

3. The COLOUR, which reveals the direction of market


movement – a green (or white) body indicates a price
increase, while a red (or black) body shows a price
decrease

BASIC CANDLESTICK PATTERN


Six bullish candlestick patterns
Bullish patterns may form after a market downtrend, and signal
a reversal of price movement. They are an indicator for traders
to consider opening a long position to profit from any upward
TRAJECTORY/JOURNEY/MOVEMENT.

1. Hammer
The hammer candlestick pattern is formed of a short body with
a long lower wick, and is found at the bottom of a downward
trend.
2. Inverse hammer

A similarly bullish pattern is the inverse/inverted


hammer. The only difference being that the upper wick is
long, while the lower wick is short.

It indicates a buying pressure, followed by a selling


pressure that was not strong enough to drive the market
price down. The inverse hammer suggests that buyers
will soon have control of the market.
3. Bullish engulfing

The bullish engulfing pattern is formed of two


candlesticks. The first candle is a short red body that is
completely engulfed by a larger green candle.

Though the second day opens lower than the first, the
bullish market pushes the price up, culminating in an
obvious win for buyers.
4. Piercing line
The piercing line is also a two-stick pattern, made up of a
long red candle, followed by a long green candle.

There is usually a significant gap down between the first


candlestick’s closing price, and the green candlestick’s
opening. It indicates a strong buying pressure, as the
price is pushed up to or above the mid-price of the
previous day.

5. Morning star

The morning star candlestick pattern is considered a sign


of hope in a bleak market downtrend. It is a three-stick
pattern: one short-bodied candle between a long red and
a long green. Traditionally, the ‘star’ will have no overlap
with the longer bodies, as the market gaps both on open
and close.
It signals that the selling pressure of the first day is
subsiding, and a bull market is on the horizon.

6. Three white soldiers

The three white soldiers pattern occurs over three days.


It consists of consecutive long green (or white) candles
with small wicks, which open and close progressively
higher than the previous day.

It is a very strong bullish signal that occurs after a


downtrend, and shows a steady advance of buying
pressure.

Six bearish candlestick patterns


Bearish candlestick patterns usually form after an
uptrend, and signal a point of resistance. Heavy
pessimism about the market price often causes traders
to close their long positions, and open a short position to
take advantage of the falling price.

1. Hanging man
The hanging man is the bearish equivalent of a hammer;
it has the same shape but forms at the end of an
uptrend.
It indicates that there was a significant sell-off during the
day, but that buyers were able to push the price up
again. The large sell-off is often seen as an indication that
the bulls are losing control of the market.
2. Shooting star

The shooting star is the same shape as the inverted


hammer, but is formed in an uptrend: it has a small lower
body, and a long upper wick.

Usually, the market will gap slightly higher on opening


and rally to an intra-day high before closing at a price just
above the open – like a star falling to the ground.
3. Bearish engulfing
A bearish engulfing pattern occurs at the end of an
uptrend. The first candle has a small green body that is
engulfed by a subsequent long red candle.

It signifies a peak or slowdown of price movement, and is


a sign of an impending market downturn. The lower the
second candle goes, the more significant the trend is
likely to be.
4. Evening star

The evening star is a three-candlestick pattern that is the


equivalent of the bullish morning star. It is formed of a
short candle sandwiched between a long green candle
and a large red candlestick.

It indicates the reversal of an uptrend, and is particularly


strong when the third candlestick erases the gains of the
first candle.
5. Three black crows

The three black crows candlestick pattern comprises of


three consecutive long red candles with short or non-
existent wicks. Each session opens at a similar price to
the previous day, but selling pressures push the price
lower and lower with each close.

Traders interpret this pattern as the start of a bearish


downtrend, as the sellers have overtaken the buyers
during three successive trading days.
6. Dark cloud cover
The dark cloud cover candlestick pattern indicates a
bearish reversal – a black cloud over the previous day’s
optimism. It comprises two candlesticks: a red
candlestick which opens above the previous green body,
and closes below its midpoint.

It signals that the bears have taken over the session,


pushing the price sharply lower. If the wicks of the
candles are short it suggests that the downtrend was
extremely decisive.

You might also like