Candlestick Chart Patterns: Candlestick patterns can be used in trading to analyze the price action of an asset and identify potential buy or sell signals. Traders use candlestick patterns in combination with other technical analysis tools to make informed trading decisions.
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Use Of Candlestick Chart Patterns In Trading
One use of candlestick patterns is to identify trend reversals. For example, a bullish engulfing pattern, which consists of a bearish candlestick followed by a larger bullish candlestick that completely engulfs the previous candlestick’s body, can signal a potential trend reversal from bearish to bullish. Similarly, a bearish engulfing pattern can signal a potential trend reversal from bullish to bearish.
Another use of candlestick patterns is to confirm trends. For example, a series of three white soldiers, which consists of three long bullish candlesticks with small or no shadows, can confirm an uptrend and signal a potential buying opportunity. On the other hand, a series of three black crows, which consists of three long bearish candlesticks with small or no shadows, can confirm a downtrend and signal a potential selling opportunity.
Candlestick patterns can also be used to identify support and resistance levels. For example, a tweezers bottom, which consists of two candlesticks with matching lows, can indicate a strong support level. Similarly, a tweezers top, which consists of two candlesticks with matching highs, can indicate a strong resistance level.
Traders can also use candlestick patterns to identify potential entry and exit points for trades. For example, a bullish harami, which consists of a long bearish candlestick followed by a small-bodied bullish candlestick that is completely contained within the previous candlestick’s body, can signal a potential entry point for a long trade. Conversely, a bearish harami can signal a potential entry point for a short trade.
Overall, the use of candlestick patterns in trading can provide valuable insights into price action and help traders make more informed decisions. However, it’s important to remember that no single indicator or tool can guarantee successful trades, and traders should always use a combination of analysis tools and risk management strategies to mitigate potential losses.
Also Read: Candlestick Charts – Basic Understanding
Bullish Candlestick patterns
1. Hammer Candlestick Pattern:
A hammer is a bullish reversal pattern that forms after a downtrend. It has a small body with a long lower shadow, which indicates that sellers pushed the price down but buyers eventually won out and pushed the price back up.
2. Piercing Candlestick Pattern:
A piercing pattern is a bullish reversal pattern that forms after a downtrend. It consists of two candlesticks: a bearish candlestick followed by a bullish candlestick that opens below the low of the previous candle and closes above its midpoint.
3. Bullish Engulfing Candlestick Pattern:
A bullish engulfing pattern is a bullish reversal pattern that forms after a downtrend. It consists of two candlesticks: a bearish candlestick followed by a larger bullish candlestick that completely engulfs the previous candlestick’s body.
4. Morning Star Candlestick Pattern:
The morning star is a bullish reversal pattern that forms after a downtrend. It consists of three candlesticks: a long bearish candlestick, a small-bodied candlestick that gaps down, and a long bullish candlestick that closes above the midpoint of the first candlestick.
5. Three White Soldiers Candlestick Pattern:
Three white soldiers is a bullish reversal pattern that forms after a downtrend. It consists of three long bullish candlesticks with small or no shadows, indicating a strong uptrend.
6. White Marubozu Candlestick Pattern:
A white marubozu is a bullish candlestick pattern with no shadows, indicating a strong bullish trend.
7. Three Inside Up Candlestick Pattern:
Three inside up is a bullish reversal pattern that forms after a downtrend. It consists of a bearish candlestick followed by a small-bodied candlestick that gaps down, and then a larger bullish candlestick that completely engulfs the previous candlestick’s body.
8. Bullish Harami Candlestick Pattern:
A bullish harami is a bullish reversal pattern that forms after a downtrend. It consists of a long bearish candlestick followed by a small-bodied bullish candlestick that is completely contained within the previous candlestick’s body.
9. Tweezer Bottom Candlestick Pattern:
A tweezer bottom is a bullish reversal pattern that forms after a downtrend. It consists of two candlesticks with matching lows, indicating strong support at that level.
10. Inverted Hammer Candlestick Pattern:
An inverted hammer is a bullish reversal pattern that forms after a downtrend. It has a small body with a long upper shadow, which indicates that buyers pushed the price up but sellers eventually won out and pushed the price back down.
11. Three Outside Up Candlestick Pattern:
Three outside up is a bullish reversal pattern that forms after a downtrend. It consists of a bearish candlestick followed by a larger bullish candlestick that completely engulfs the previous candlestick’s body, and then a third bullish candlestick that closes above the high of the first candlestick.
12. On-Neck Pattern Candlestick Pattern:
The on-neck pattern is a bearish and bullish continuation pattern that forms after a downtrend or after an uptrend. It consists of a long bearish candlestick, followed by a small-bodied bullish candlestick that closes near the high of the previous candlestick, and then another bearish candlestick that closes below the low of the small-bodied candlestick and vice versa.
13. Bullish Counterattack Candlestick Pattern:
The bullish counterattack pattern is a bullish reversal pattern that forms after a downtrend. It consists of a long bearish candlestick followed by a long bullish candlestick that completely engulfs the previous candlestick’s body, indicating a strong bullish reversal.
Bearish Candlestick Chart patterns
1. Hanging Man Candlestick Pattern:
A hanging man is a bearish reversal pattern that forms after an uptrend. It has a small body with a long lower shadow, which indicates that buyers pushed the price up but sellers eventually won out and pushed the price back down.
2. Dark Cloud Cover Candlestick Pattern:
A dark cloud cover is a bearish reversal pattern that forms after an uptrend. It consists of two candlesticks: a bullish candlestick followed by a bearish candlestick that opens above the high of the previous candle and closes below its midpoint.
3. Bearish Engulfing Candlestick Pattern:
A bearish engulfing pattern is a bearish reversal pattern that forms after an uptrend. It consists of two candlesticks: a bullish candlestick followed by a larger bearish candlestick that completely engulfs the previous candlestick’s body.
4. The Evening Star Candlestick Pattern:
The evening star is a bearish reversal pattern that forms after an uptrend. It consists of three candlesticks: a long bullish candlestick, a small-bodied candlestick that gaps up, and a long bearish candlestick that closes below the midpoint of the first candlestick.
5. Three Black Crows Candlestick Pattern:
Three black crows is a bearish reversal pattern that forms after an uptrend. It consists of three long bearish candlesticks with small or no shadows, indicating a strong downtrend.
6. Black Marubozu Candlestick Pattern:
A black marubozu is a bearish candlestick pattern with no shadows, indicating a strong bearish trend.
7. Three Inside Down Candlestick Pattern:
Three inside down is a bearish reversal pattern that forms after an uptrend. It consists of a bullish candlestick followed by a small-bodied bearish candlestick that gaps up, and then a larger bearish candlestick that completely engulfs the previous candlestick’s body.
8. Bearish Harami Candlestick Pattern:
A bearish harami is a bearish reversal pattern that forms after an uptrend. It consists of a long bullish candlestick followed by a small-bodied bearish candlestick that is completely contained within the previous candlestick’s body.
9. Shooting Star Candlestick Pattern:
A shooting star is a bearish reversal pattern that forms after an uptrend. It has a small body with a long upper shadow, which indicates that buyers pushed the price up but sellers eventually won out and pushed the price back down.
10. Tweezer Top Candlestick Pattern:
A tweezer top is a bearish reversal pattern that forms after an uptrend. It consists of two candlesticks with matching highs, indicating strong resistance at that level.
11. Three Outside Down Candlestick Pattern:
Three outside down is a bearish reversal pattern that forms after an uptrend. It consists of a bullish candlestick followed by a larger bearish candlestick that completely engulfs the previous candlestick’s body, and then a third bearish candlestick that closes below the low of the first candlestick.
12. Bearish Counterattack Candlestick Pattern:
The bearish counterattack pattern is a bearish reversal pattern that forms after an uptrend. It consists of a long bullish candlestick followed by a long bearish candlestick that completely engulfs the previous candlestick’s body, indicating a strong bearish reversal.
Continuous Candlestick Chart Patterns
1. Doji Candlestick Pattern:
A doji is a candlestick pattern that has the same open and close price, or a very small difference between them. It indicates indecision in the market and can signal a potential reversal in trend.
2. Spinning Top Candlestick Pattern:
A spinning top is a candlestick pattern with a small body and long upper and lower shadows. It indicates indecision in the market and can signal a potential reversal in the trend.
3. Falling Three Methods Candlestick Pattern:
Falling three methods is a bearish continuation pattern that occurs during a downtrend. It consists of a long bearish candlestick followed by three small bullish candlesticks that trade within the range of the first candlestick, and then another long bearish candlestick.
4. Rising Three Methods Candlestick Pattern:
Rising three methods is a bullish continuation pattern that occurs during an uptrend. It consists of a long bullish candlestick followed by three small bearish candlesticks that trade within the range of the first candlestick, and then another long bullish candlestick.
5. Upside Tasuki Gap Candlestick Pattern:
Upside tasuki gap is a bullish continuation pattern that occurs during an uptrend. It consists of a long bullish candlestick followed by a gap up and a small-bodied bearish candlestick, and then another bullish candlestick that opens within the body of the second candlestick.
6. Downside Tasuki Gap Candlestick Pattern:
Downside tasuki gap is a bearish continuation pattern that occurs during a downtrend. It consists of a long bearish candlestick followed by a gap down and a small-bodied bullish candlestick, and then another bearish candlestick that opens within the body of the second candlestick.
7. Mat-Hold Candlestick Pattern:
The mat-hold pattern is a continuation pattern that occurs during a trend. It consists of a long-bodied candlestick followed by several small-bodied candlesticks that stay within the range of the first candlestick, and then another long-bodied candlestick that confirms the trend.
8. Rising Window Candlestick Pattern:
A rising window, also known as a gap up, is a bullish candlestick pattern that occurs when the opening price of a candlestick is higher than the closing price of the previous candlestick, creating a gap in the chart.
9. Falling Window Candlestick Pattern:
A falling window, also known as a gap down, is a bearish candlestick pattern that occurs when the opening price of a candlestick is lower than the closing price of the previous candlestick, creating a gap in the chart.
10. High Wave Candlestick Pattern:
A high wave is a candlestick pattern with a long upper and lower shadow and a small body. It indicates high volatility and indecision in the market.
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