It’s does not matter how you feel in the past, I am going to list and discuss 9 types of candlestick patterns explained with examples which change your life completely. So that you never depended on any trading company or another person to execute your successful trading. ( Also Read: How to Pick Best demat account in India with lowest brokerage? )
Types of Candlesticks: I remembered that I promise you in the title all about candlestick patterns explained with examples, but you must be understood the value of candlesticks pattern before learning the technical analysis process.
Dear friends, always I love to start from the beginning and wish to provide you all the basic knowledge which help you to understand how to analyze a candlestick pattern on a candlesticks chart with examples.
Keep reading this blog article to better understand the behavior of candlestick pattern. I promise, after learning the whole things about candlestick patterns, your mind & eyes become like the candlestick pattern indicator.
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Candlestick patterns working as the technical tool on stock trading analysis. A single candlestick patterns or candlestick charts formed by multiple candlesticks with a specific time frame. A candlestick chart represents the overall designed with whole candlesticks within a single time frame. As an example, a 15 minutes Candlestick chart represent the arrangement of multiple 15 minutes candle organized one by one in a manner. While Candlestick Patterns represent some specific types of patterns created by a single or multiple candlesticks.
Example: Doji is a type of candlestick pattern which is made by a single candlestick. Where the morning star candlestick created by 3 piece of single candlesticks back to back arranged with a specific manner.
A candlestick helps you to know the price variation over a time period. Also the strength of buyers and sellers within that time frame. When I was a beginner, at that time I refuse to learn candlestick pattern. Because I love the simplest things every time, so I was stack with line chart first 10 days. But line chart can’t help me anymore. So I started to learn the candlestick behavior then I entered to analyze technical chart through candlestick pattern.
A simple candlestick looks like the figure below.
A candlestick provides you with four pieces of information:
- The open price.
- The close price.
- The high price.
- The low price.
The color of the candlestick is also significant in understanding whether the open price was higher or lower than the close price.
- If the candle is red this means that the open price is, lower than the close price.
- If the candle is green this means that the open price is, higher than the close price.
Green candlestick denoted as the Bullish Candle, and a Red candlestick denoted as the Bearish Candle.
Importance of Candlestick Patterns
Without a candlestick, you fail to imagine the sentiment and behavior of other traders, investors and smart money. A candlestick helps you to set up your trade with a logical pattern. If you learn candlesticks seriously, you became a money attracting magnet.
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The first candlestick can define the second and the second help you to determine the third candle. This property informs us about the probabilities of price in the future.
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How Candlestick Patterns Define Buy Signal and Sale Signal?
Candlestick chart analysis can defines the future candlestick behavior, that’s true! But not perfectly. If you want to know the accurate result, you need to learn the types of the candlestick which helps you to take your trade. I am not believing with a single Japanese candlestick, so I use the combination of the candlestick which called “Japanese candlestick patterns” which helps me to indicate buy signals and sale signals according to the behavior of candlestick patterns already formed.
But before going to learn candlestick pattern, allow your brain to put these types of candlesticks in your mind. These are the fundamentals of a candlestick chart.
- Read more about Japanese Candlestick Patterns from the book Japanese Candlestick Charting Techniques.
Types Of Candlestick Patterns Explained With Examples For Beginners
Many types of candlesticks chart or candlestick patterns work for successful traders. Actually, these patterns are the basics of stock market trading. Today I only discuss a few of them which needs a beginner to understand the basic level of technical chart analysis.
List of Top 9 Types of Candlesticks Patterns Explained with Examples
Doji is a type of candlesticks who have zero or almost zero difference between its open price and close price. Doji candlestick forms may vary according to the shape & length of the shadow. 5 types of Doji Candlesticks you can be seen here, which are the most valuable soldier of a candlestick chart.
Examples of Doji Candlesticks:
Doji appears in a candlestick chart at that time when the potential of buyers and sellers approximately equal. Now the time to set up your trade, because its the time to world wors between buyer and seller. If buyers win, stock market price going to high, otherwise sellers win the war and market price will be falling gradually.
Doji Candlestick is the clear sign of trend reversal. That means if Doji appears after a bullish trend, the Bearish trend going to start very soon.
A “Hammer Candlestick” is a candlestick with a small body, a small range from open to close price with a long shadow producing below the body, and little shadow or no shadow above.
Examples of Hammer Candlesticks
Example: When a hammer appears at the bottom of a downtrend, its long with a long shadow that means an unsuccessful effort by sellers to push the price down, and a corresponding effort by buyers to step in and push the price back up quickly before the period closed. So now the time for bullish candle next and may change the trend.
Hanging Man Candlestick
Hanging Man candlestick shape same as hammer candlestick, but it occurred in the uptrend. The neckline shadow appears downside and the visual body is like this,
Hanging Man candlestick is the first sign of top line of the uptrend and starting the downtrend. But for the confirmation, you should wait for next Bearish candle reach the neckline shadow.
Shooting Star Candlestick
Shooting Star candlestick is the simple inverted symbol of hanging man candlestick. In this case, the shadow or tell appears above the candle body.
See the example here,
as a confirmation of downtrend, wait to reach the next bearish candle to the lowest price of the shooting star candlestick.
Checkmates occur when the trading price range is locked within a small area with a long time like the image shown below. Checkmate candlesticks pattern is the great sign of the reversal in trend.
You must use any support level or resistance level to make sure about the trend reversal direction. Look at the pictures above for better understanding.
Evening Star Candlestick
Evening Star candlestick is same as a doji with a small body. It appears after a long bullish candle and will be a gap up opening. Evening Star candlestick pattern consists of 3 single candles,
- A long bullish candle.
- A small-bodied bearish candle.
- A long bearish candle that opens at or below the low point of the Evening Star Candlestick.
Examples of Evening Star Candlesticks:
If the Shooting Star Candlesticks pattern appears after an uptrend, it is the clear indication of the reversal of the trend, that means downtrend already started.
Morning Star Candlestick
Morning Star candlestick also same as a doji with a small body. It appears after a long bearish candle and will be a gap down opening. Morning Star candlestick pattern consists of 3 single candles,
- A long bearish candle.
- A small-bodied bullish candle.
- A long bullish candle that opens at or higher the high point of the middle Candlestick.
Examples of Morning Star Candlesticks:
If the Morning Star Candlesticks pattern appears after an downtrend, it is the clear indication of the reversal of the trend, that means uptrend already started.
Bullish Engulfing Candlestick
In this pattern, the real body (open to close) of a bearish candlestick is encompassed by the body of next bullish candle. This indicates an increase in activity from both bears and bulls, and a shift of overall market sentiment towards uptrend.
Examples of Bullish Engulffing:
It indicates that the demand for buying is increased so after a downtrend you can take it as trend reversal.
Bearish Engulfing Candlestick
In this pattern, the real body (open to close) of a bullish candlestick is encompassed by the body of next bearish candle. This indicates an increase in activity from both bears and bulls, and a shift of overall market sentiment towards downtrend.
Examples of Bearish Engulfing:
It indicates that the demand for selling is increased so after a uptrend you can take it as trend reversal.
These are enough for basic knowledge!
By the way, I will discuss so many candlestick patterns in the next blog post ( in part 2 ) which works for me.
So friends, don’t forget to comment your experience about the article candlestick patterns explained with examples.
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