The 5 Most Powerful Candlestick Patterns

Spinning tops Spinning tops are simply candles with small real bodies. The Inverted Hammer looks exactly like a Shooting Star, but forms after a decline or downtrend. Now look how Japanese candlesticks looks on a price chart. Is it really easy for a new person? Note that the candlestick chart lines use the same data as a bar chart the open, high, low and close. The candles to the right are all bearish, meaning that over the course of these time periods there were more sellers than buyers.

How to use Japanese candlesticks? A Japanese candlestick chart provides the trader with crucial information about price action at any given point in time. Traders often confirm their signals with Japanese candlestick patterns, improving the .

Candlestick Charting Explained

For instance, a tall upper shadow shows the market rejected higher prices while a long lower shadow typifies a market that has tested and rejected lower prices. Candlestick charts will often provide reversal signals earlier, or not even available with traditional bar charting techniques. Even more valuably, candlestick charts are an excellent method to help you preserve your trading capital.

Exhibit 1 is a bar chart. In the circled area of Exhibit 1, the stock looks strong since it is making consecutively higher closes. Based on this aspect, it looks like a stock to buy. This candlestick chart Exhibit 2 uses the same data as Exhibit 1 above , remember, a candlestick chart uses the same data as a bar chart; open, high, low and close. Note the different perspective we get with the candlestick chart than with the bar chart.

On the candlestick chart, in the same circled area, there are a series of small real bodies which the Japanese nickname spinning tops. Small real bodies hint that the prior trend i. As such, while the bar chart makes it look attractive to buy, the candlestick chart proves there is indeed a reason for caution about going long. The small real bodies illustrate the bulls are losing force. Thus, by using the candlestick chart, a swing trader, day trader or even if you do active investing would likely not buy in the circled area.

The result — avoiding a losing trade. This is but one example of how Japanese candlestick charts will help you preserve capital. Nison Candlesticks truly shine at helping you preserve capital! With candlestick charts, one can use candlestick charting techniques, or Western techniques, or a combination of both.

This union of Eastern and Western techniques provides our clients with uniquely effective tools to help enhance profits and decrease market risk exposure. However, while this pamphlet provides only a basic introduction to candlestick charts we hope you have discovered how Nison candlestick trading techniques can help enhance profits and decrease market risk.

Are easy to understand: Anyone, from the person new to technical analysis to the seasoned professional trader can easily harness the power of candlestick charts. This is because, as will be shown later, the same data required to draw a bar chart high, low, open and close is used for a candlestick chart.

It therefore has no wick and is a very bullish signal since the price has closed near the highs of the day without ever going down. Similarly, a black marubozu occurs when the open is the highest price and the close is the lowest and is bearish for the market.

The hanging man pattern indicates a possible reversal and normally comes at the top of an uptrend. It occurs when the market opens high, is dragged downwards then finishes back near the highs. Although the candle has closed near to its highs, the long wick down indicates that sellers are finally joining the market and beginning to outnumber the buyers.

If you see this signal in a chart be weary of a potential reversal event. DXY supported at No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website.

The past performance of any trading system or methodology is not necessarily indicative of future results. Forex, Futures, and Options trading has large potential rewards, but also large potential risks.

The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets.

Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice.

We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. Candlesticks charts are more fun to look at. Bullish Candle Signals uptrend movement, they occur in different lengths; the longer the body, the more significant the price increase Bearish Candle Signals downtrend movement, they occur in different lengths; the longer the body, the more significant the price decrease.

Long Lower Shadow These candles provide a bullish signal, the lower shadow must be at least the size of the real body; the longer the lower shadow the more reliable the signal. Hammer The hammer is a bullish signal that occurs during a downtrend.

Shooting Star This candle has a long upper shadow with little, or no lower shadow, and a small real body near the lows of the session that develops during or after and uptrend. Engulfing candles The bullish engulfing pattern consists of large white real body that engulfs a small black real body in a downtrend. Spinning tops Spinning tops are simply candles with small real bodies. Pin Bars The pin bar can include the following previously described candlestick patterns; long lower shadow candles and long upper shadow candles, hammers and shooting stars, dragonfly and gravestone dojis.

Inside Bars Inside bars can technically encompass any candlestick pattern because they are simply a series of at least two candlesticks where the first candlestick completely engulfs the entire range of the subsequent candlestick, however, more often than not inside bars end up being spinning tops or dojis.

In Conclusion Candlestick charts offer a more vivid depiction of price action than what a standard bar chart can provide. Am glad reading this information on candlesticks, thanks very much Reply. Ibra Ibrahim mango August 27, at 9: Thanks for your education of candlestick pattern. Sam June 29, at Thank you very much Reply. Sydney Wentink June 12, at 5: Nomathemba May 18, at 4: Sanjar Ibrokhimov May 16, at 1: Nasir Sulaiman May 2, at 7: Its an amazing summary of trading, which I have ever come across thanks to the femous trader Reply.

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Candlestick Pattern Reliability

Technical analysis using Japanese candlesticks Japanese candlesticks can be used in conjunction to identify the current market conditions and the possible future price direction. This is done by using the information they present to show the balance between the buyers and sellers in the markets. Learn to Trade for Profit: Japanese Candlestick Stock Trading is an introductory course designed to show the visual power of Japanese candlesticks when trading in the stock market. Whether you are trading stocks, forex, cryptocurrencies, commodities. Introduction to Candlesticks. History. The Japanese began using technical analysis to trade rice in the 17th century. While this early version of technical analysis was different from the US version initiated by Charles Dow around , many of the guiding principles were very similar.