Introduction to Candlesticks

Basics of Japan Candlesticks, Patterns and Types for Technical Analysis



Candlestick patterns and what to expect

The candlesticks are used to identify trading patterns. Patterns, in turn, help the technical analyst to set up a trade. The patterns are formed by grouping two or more candles in a certain sequence. However, sometimes powerful trading signals can be identified by just a single candlestick pattern.


Hence, candlesticks can be broken down into single candlestick pattern and multiple candlestick patterns.

Under the single candlestick pattern, we will be learning the following…


Marubozu

Bullish Marubozu

Bearish Marubozu

Doji

Spinning Tops

Paper umbrella

Hammer

Hanging man

Shooting star

Multiple candlestick patterns are a combination of multiple candles. Under the multiple candlestick patterns we will learn the following:


Engulfing pattern

Bullish Engulfing

Bearish Engulfing

Harami

Bullish Harami

Bearish Harami

Piercing Pattern

Dark cloud cover

Morning Star

Evening Star

Of course you must be wondering what these names mean. As I had mentioned in the previous chapter, some of the patterns retain the original Japanese name.


Candlestick patterns help the trader develop a complete point of view. Each pattern comes with an in-built risk mechanism. Candlesticks give an insight into both entry and stop loss price.



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