In this blog, we discuss some candlestick Pattern that every trader should know. We discuss both bullish and bearish pattern which helps investor to know whether market goes up or down.
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A doji pattern:
It represents an equilibrium between supply and demand, a tug of war that neither the bulls nor bears are winning.
In the case of an uptrend, the bulls have by definition won previous battles
because prices have moved higher. Now, the outcome of the latest skirmish is in doubt. After a long
downtrend, the opposite is true. The bears have been victorious in previous battles, forcing prices
down. Now the bulls have found courage to buy, and the tide may be ready to turn.
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| Doji candle |
A “long-legged”doji
This type of doji is a far more dramatic candle. It says that prices moved far higher on the
day, but then profit taking kicked in. Typically, a very large upper shadow is left. A close below the
midpoint of the candle shows a lot of weakness. Here’s an example of a long-legged doj.
Gravestone doji
"Gravestone doji" as the name implies, is probably the most ominous candle of all, on that day, price rallied, but could not stand the altitude they achieved. By the end of the day. They came back and closed at the same level.
Here ’s an example of a gravestone doj
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A “Dragonfly”
doji depicts a day on which prices opened high, sold off, and then returned to the
opening price. Dragonflies are fairly infrequent. When they do occur, however, they often resolve
bullishly (provided the stock is not already overbought as show by Bollinger bands and indicators such as stochastic).
For example
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Hangman candle
Hangman,so named because it looks like a person who has been executed with legs
swinging beneath, always occurs after an extended uptrend. The hangman occurs because traders,
seeing a sell-off in the shares, rush in to grab the stock a bargain price.
In order for the Hanging Man signal to be valid, the following conditions must exist:
• The stock must have been in a definite uptrend before this signal occurs.
• The lower shadow must be at least twice the size of the body.
• The day after the Hanging Man is formed, one should witness continued selling.
• There should be no upper shadow or a very small upper shadow. The colour of the body does
not matter, but a black body would be more positive than a white body
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The hammer
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The hammer puts in its appearance after prolonged downtrend. On the day of the hammer candle,
there is strong selling, often beginning at the opening bell. As the day goes on, however, the market
recovers and closes near the unchanged mark, or in some cased even higher. In these cases the
market potentially is “hammering” out a bottom.
In order for the Hammer signal to be valid, the following conditions must exist:
• The stock must have been in a definite downtrend before this signal occurs.
• The lower shadow must be at least twice the size of the body.
• The day after the Hammer is formed, one should witness continued buying.
• There should be no upper shadow or a very small upper shadow. The colour of the body does
not matter, but a white body would be more positive than a black body.
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A bearish engulfing candle
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A bullish engulfing candle
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In order for the Bullish Engulfing signal to be valid, the following conditions must exist:
The piercing pattern
It often will end a minor downtrend (a downtrend that often lasts between five a
fifteen trading days) The day before the piercing candle appears, the daily candle should ideally have a
fairly large dark real body, signifying a strong down day. In the classic piercing pattern, the next day’s
candle gaps below the lower shadow, or previous day’s low.
In order for the Piercing signal to be valid, the following conditions must exist:
• The stock must have been in a definite downtrend before this signal occurs.
• The second day of the signal should be a white candle opening below the low of the previous
day and closing more than half way into the body of the previous day’s black candle
In order for the Piercing signal to be valid, the following conditions must exist:
• The stock must have been in a definite downtrend before this signal occurs.
abidfa.blogspot.comThe Evening star pattern
abidfa.blogspot.comIt occurs during a sustained uptrend. On the first day we see a candle with a
long white body. Everything looks normal and the bulls appear to have full control of the stock. In the
second day, however, a star candle occur. For this to be a valid evening star pattern, the stock must
gap higher on the day of the star. The star can be either black or white. A star candle has a small real
body and often contains a large upper shadow. On the third day, a candle with a black real body
emerges. This candle retreats substantially into the real body of the first day. The pattern is made
more powerful if there is a gap between the second and third day’s candles. However, this gap is
unusual, particularly when it comes to equity trading. The further this third candle retreats into the
real body of the first day’s candle, the more powerful the reversal signal.
• The second day of the signal should be a white candle opening below the low of the previous day and closing more than half way into the body of the previous day’s black candle
The morning star
abidfa.blogspot.comThe morning star,that on the first day there is a large dark candle. The middle day is not a perfect
star, because there is a small lower shadow, but the upper shadow on top of a small real body gives it
a star quality. The third candle is a large white candle that completes the reversal. Not how the third
candle recovered nearly to the highs of the first day and occurred on strong volume.
In order for the Morning Star signal to be valid, the following conditions must exist:
• The stock must have been in a definite downtrend before this signal occurs. This can be
• The first day of the signal must be a long dark body. The second day must be a day of
indecision. The third day should be a long white candle reaching at least halfway into the body
of the first day’s dark candle.
In this article, we discuss only few candlestick Pattern. For more follow abidfakir blog and support us by sending your loveable comments.
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