CANDLE STICK PATTERNS
Candlestick patterns are a popular tool used in technical analysis to analyze price charts of financial instruments, such as stocks, currencies, commodities, and cryptocurrencies. These patterns provide insights into market sentiment and can help traders make informed decisions about potential price movements.
Here are some common candlestick patterns:
Doji :
A Doji has the same opening and closing prices, or the difference between them is very small.
It suggests market indecision and potential reversal.
Hammer and Hanging Man:
Hammer and Hanging Man patterns have a small body and a long lower shadow.
Hammer occurs in a downtrend and suggests potential reversal to the upside.
Hanging Man occurs in an uptrend and may signal a potential reversal to the downside.
Shooting Star and Inverted Hammer:
Shooting Star and Inverted Hammer patterns have a small body and a long upper shadow.
Shooting Star occurs in an uptrend and suggests a potential reversal to the downside. Inverted Hammer occurs in a downtrend and may signal a potential reversal to the upside.
Bullish and Bearish Engulfing:
Bullish Engulfing pattern occurs when a small bearish candle is followed by a larger bullish candle, completely engulfing the previous one.
Bearish Engulfing is the opposite, signaling potential downside reversal.
Morning Star and Evening Star:
Morning Star is a bullish reversal pattern consisting of three candles: a long bearish candle, followed by a small bearish or bullish candle, and then a long bullish candle.
Evening Star is the bearish counterpart.
Three White Soldiers and Three Black Crows:
Three White Soldiers is a bullish reversal pattern characterized by three consecutive long bullish candles.
Three Black Crows is the bearish equivalent.
Double Top and Double Bottom:
Double Top is a bearish reversal pattern formed after an uptrend, indicating a potential reversal to the downside.
Double Bottom is a bullish reversal pattern formed after a downtrend, signaling a potential reversal to the upside.
Head and Shoulders:
Head and Shoulders is a trend reversal pattern that consists of three peaks: a higher peak (head) between two lower peaks (shoulders).
Inverse Head and Shoulders is the bullish counterpart.
It's important to note that while candlestick patterns can be useful, they should not be used in isolation. Traders often use them in conjunction with other technical analysis tools and indicators for more robust decision-making. Additionally, market conditions and overall trends should be considered when interpreting candlestick patterns.
