Candlestick patterns

Candlestick Patterns in Technical Analysis

Common Candlestick Patterns

Doji:

A Doji forms when the opening and closing prices are nearly the same, resulting in a very small body and long shadows. It indicates market indecision and a potential reversal.

Hammer and Hanging Man:

These patterns have small bodies and long lower shadows. A Hammer occurs in a downtrend, signaling a potential bullish reversal, while a Hanging Man appears in an uptrend, indicating a potential bearish reversal.

Engulfing Pattern:

This occurs when a larger candle completely engulfs the body of the previous smaller candle. A bullish engulfing pattern forms at the end of a downtrend, suggesting a reversal to the upside, while a bearish engulfing pattern appears at the end of an uptrend, indicating a potential reversal to the downside.

Morning Star and Evening Star:

The Morning Star is a bullish reversal pattern that consists of three candles—a long bearish candle, followed by a small candle with a gap down, and then a long bullish candle. The Evening Star is its bearish counterpart, signalling a potential reversal from an uptrend.

Three Black Crows and Three White Soldiers:

Three Black Crows is a bearish pattern formed by three consecutive long red (or black) candles, indicating a strong downtrend. Three White Soldiers is a bullish pattern comprising three consecutive long green (or white) candles, suggesting a strong uptrend.

Bullish and Bearish Harami:

The Bullish Harami appears during a downtrend and consists of a small bullish candle within the previous large bearish candle, suggesting a potential reversal. The Bearish Harami occurs in an uptrend with a small bearish candle inside the preceding bullish candle, indicating a potential reversal to the downside.

Tweezer Tops and Bottoms:

Tweezer Tops occur when two candles have matching highs, signalling a potential reversal from an uptrend. Tweezer Bottoms form when two candles have identical lows, suggesting a potential reversal from a downtrend.

Note: While candlestick patterns can provide valuable insights, they should not be solely relied upon for making trading decisions. Risk management and comprehensive analysis involving multiple factors are crucial in trading and investing.