Candlestick patterns

Japanese method of trading

TECHNICAL ANALYSIS

Lillaney

5/5/20231 min read

a person using a laptop computer with a chart on the screen
a person using a laptop computer with a chart on the screen

Candlestick patterns are a popular tool used in technical analysis to identify potential trend reversals or continuation. Candlesticks are graphical representations of price movements for a specific period, typically a day. Each candlestick has a body and wicks (or shadows) at the top and bottom.

There are many different types of candlestick patterns, but here are a few common ones:

  1. Doji: A doji candlestick has a small body and wicks at the top and bottom that are almost equal in length. It indicates indecision in the market and could signal a potential trend reversal.

  2. Hammer: A hammer candlestick has a small body and a long lower wick. It indicates a potential trend reversal from a bearish to a bullish trend.

  3. Shooting Star: A shooting star candlestick has a small body and a long upper wick. It indicates a potential trend reversal from a bullish to a bearish trend.

  4. Engulfing: An engulfing candlestick pattern occurs when a small candlestick is followed by a larger candlestick that completely engulfs the previous one. It indicates a potential trend reversal.

  5. Harami: A harami candlestick pattern occurs when a large candlestick is followed by a small candlestick that is completely contained within the previous one. It indicates a potential trend reversal.

These are just a few examples of candlestick patterns. Traders often use these patterns in combination with other technical indicators to identify potential buy and sell signals.