All about Candlestick Patterns.

- By Scan a Trade

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What are candlesticks?

Candlesticks are formed with four parameters OHLC:

  • Open - Opening Price
  • High - Highest Price
  • Low - Lowest Price
  • Close - Closing Price

What are candlestick patterns?

Candlestick patterns are formed when we combine one or more candlesticks. They are used to predict possible price movements based on historical patterns.

Candlesticks charts Vs Line Charts

With Line charts, one cannot predict future movements as they contain only closing price points while candlestick charts have more information hence they are used by many traders.

Types of Candlestick Patterns.

There are 4 types of candlestick patterns.

  • Bullish Reversal pattern
  • Bullish Continuation pattern.
  • Bearish Reversal pattern
  • Bearish Continuation pattern.

Top 5 Bullish Candlestick patterns.

  • Hammer
  • Bullish Engulfing
  • Morning Star
  • Bullish Harami
  • White Marubozu

Top 5 Bearish Candlestick patterns.

  • Shooting Star
  • Bearish Engulfing
  • Evening Star
  • Bearish Harami
  • Black Marubozu

Best Way to Trade with Candlesticks.

  • Combine it with Supporting Indicators
  • Check the Location where they are formed. For example, a hammer at support is more powerful than a hammer formed inside consolidation
  • Check Volume with candlestick patterns. Volume should be higher than average
  • Wait for the confirmation candle

When Not to trade with candlestick Patterns?

Most Technical analysis fails when there is a piece of very strong news going on that assets. That’s why you should not trade with candlestick patterns on any news event and always wait for the price to settle down.

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