What is Candlesticks patterns -
Candlesticks patterns are used to predict the future
direction of price movement. The most 16 common candlesticks patterns and use
of them to identify the opportunities while trading.
What is the candlestick
A candlestick is a way to display the information about an
asset’s price movement. It is one of the most popular components of technical
analysis and to catch the price action on the movement.
The candlesticks have three basic features :
- The body, which represents the
open-to-close range
- The wick. Or shadow, that
indicates the intraday high and low
- The colour, which reveals the
direction of stock movement basically green body indicates a price
increase and red body shows a price decrease.
Before
you start trading, its important to familiarize yourself with the basics of
candlestick and the only way to understand is “PRACTISE READING CANDLESTICK
PATTERNS”.
The best way to learn to read candlestick patterns is to practice
entering and exiting trades from the signals they give. You can develop your
skills in Demat – trading account, you may open by clicking below:
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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.
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. A hammer shows that
although there were selling pressures during the day, ultimately a strong
buying pressure drove the price back up. The color of the body can vary but
green hammers indicate a stronger bull market then red hammers.
It
formed like –
Inverse
hammer
A
similarly bullish pattern is the 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 buyer will soon have control of
the market.
It
formed like –
Bullish
engulfing
The
bullish engulfing pattern is formed of two candlesticks. The first candle is
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, climaxing in an clear win for buyers.
It
formed like –
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 candlesticks closing price,
and the green candlesticks opening. It indicates a strong buying pressure, as
the price is pushed up to or above the mid - price of the previous
day.
It formed like –
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.
It formed like –
Three
white soldiers
The
three white soldiers pattern occurs over three days. It consists of consecutive
long green candles with small wicks, which open and close progressively higher
then the pervious day.
It is
a very strong bullish signal that occurs after a downtrend and shows a steady
advance of buying pressure.
It
formed like –
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