What is a candlestick pattern?
Candlestick Patterns are the depiction of the movement in the prices in the market in form of candlestick charts that can be used to depict some particular direction of the market movement. These charts are prepared as per the defined parameters mentioned by the trader and these rules have to meet some of the pre-defined parameters. Broadly of 42 types, these patterns can be categorized into either simple or complex patterns. Based on this importance, it is important for every newbie trader to have a sound knowledge of these patterns. Hence the article details further on the methods to teach about Candlestick Patterns to the newbies in the field.
Candlestick Patterns simplified
This method developed by the ancient Japanese traders has indeed proved to be useful for trade analysis by a majority of the traders to determine the current marketing conditions. There are 10 basic Candlestick Patterns that a newbie must be aware of and these have been categorized into the following types: –
- Downtrend or bottom reversal
This category is used to determine the downward trend in the market and includes the following 4 types of charts-
- Bullish Engulfing Pattern, that uses two candlesticks and can be identified easily on the basis of their support levels. This is one of the strongest one to determine the downward trend.
- Piercing Pattern, using two candlesticks and is used quite rarely in the daily markets.
- Hammer Candlestick Pattern, that uses only 1 candlestick and is used for longer timeframes.
- Morning Star Candlestick Pattern, using 3 candlesticks and is a common one used in all time frames.
- Uptrend or top reversal
This is used to determine the uptrends in the market. It has the following four types-
- Bearish Engulfing Candlestick Pattern, using two candlesticks and is the most common one for uptrend situations.
- Dark Cloud Cover Candlestick Pattern, using two sticks and is quite rarely used.
- Shooting Star Pattern, using only one stick and has specified appearance and characteristics
- Evening Star candlestick pattern, using 3 candlesticks
- Majic Dojis
- Dragon Fly Doji, a rare pattern used as a modified version of the Morning Star pattern
- Gravestone Doji, that is used as a modified version of the Evening Star pattern