Reading Candlestick Pattern

There are two types of financial market analysis: technical and fundamental. Fundamental analysis is based on macroeconomic conditions, quarterly earnings and the current interest rates to predict future price movements. Technical analysis uses charts that show patterns created by securities in the past.

This article will discuss the Candlestick patterns. We'll also show you how to read candlestick charts.

Candlestick Designs

Candlestick patterns are formed when an asset's price changes. Although technical charts can show random patterns, traders use specific patterns to indicate whether they want to buy or sell. These patterns should not be taken as guarantees.

These patterns can be divided into two groups: bullish or bearish. Bearish patterns could indicate a rise in the price, while bullish patterns may signal a decline.

Candlestick Components

A candlestick, similar to a bar graph, shows whether the markets are open, closed, high, or low during the trade session. The "real body" is the largest portion of a candlestick. It refers to the price range between open and close during a trading session.

If the real body is dark in colour it indicates that the closing price is lower than the opening price. It is also possible to have an empty body. This means that the closing price was lower than the opening one.

The colour of trading platforms can be changed by traders. A down candle, for example, is shaded in red instead of black as previously described. An alternative to white, you can give the up candle a green color.

How do you read candlestick patterns

There are many basic types of candlestick patterns, including bearish, bullish, bearish, bullish, engulfing, and bearish, engulfing. Let's now learn how to interpret candlesticks.

• Bearish Engulfing pattern: This is when the buyers and sellers of security have more than each other. This pattern can be seen when a large red body surrounds a smaller green body. This is a sign that the bears have control of the security and that it is likely to fall in price.
• Bullish Engulfing Pattern: This pattern is formed when buyers exceed sellers. This pattern looks like an extended green body that is engulfing small red body. This pattern is interpreted by traders as a buy signal. When a bullish-engulfing pattern forms, prices will likely move higher.
• Bearish Evening star: An evening Star is a pattern that forms when the security's price has reached its maximum. The pattern is considered bearish when the last candle in it opens below the previous days small real body. This pattern could indicate that security may be subject to selling pressure in the future.
• Bearish Harami This indicates that traders are uncertain. A bearish harami is a small, reddish body that lies within the body of the previous day. The up trend may continue if the price momentum is still upwards after such a pattern has been formed. However, if the price starts to fall, it is more likely that it will slide further.
• Bullish Harami A bullish harami is a pattern where a small, green-coloured, real body forms within the larger, real body from the previous day. This pattern indicates that the trend is stalling and an upward movement could soon follow.
• Bearish Harami cross: This pattern is formed during an uptrend. The pattern bearish harami crossed is formed when a doji follows a up candle. This is where the candlestick is almost equal open and closed. The doji also remains within the body of the previous session. This pattern is interpreted by traders the same way as a bearish Harami.
• Bullish Harami cross: This candlestick pattern forms during a downtrend. This happens when a down candle is followed by a doji. The formation occurs when a doji follows a down candle. It is similar to bullish Harami.

Conclusion:Candlestick patterns can help traders predict future price movements. Candlestick patterns help traders predict future price movements. Experts caution that they may not always be true.