What Are Some Candlestick Graph Patterns?
A candlestick graph is a visual representation of the price movements of a security or financial instrument over time. The candlestick graph is so named because the rectangular bars that it’s made up of resemble the candles used in traditional Japanese candlestick charting.
What Are Some Candlestick Graph Patterns?
Candlesticks are composed of a body (the rectangle) and one or more shadows (the lines extending from the body). The body represents the opening and closing prices for the security, while the shadows represent the high and low prices for the security. Whether you’re an experienced trader who does this professionally or a new trader who’s getting into the game on your new laptop at home, learning to identify these patterns can be a huge factor in your success.
In technical analysis, a candlestick graph can be used by investors to predict future stock prices. Each candlestick graph is made up of a series of “candles” that show the opening price, the high price, the low price, and the closing price. The color of the candle can indicate whether the price went up (white) or down (black) from the opening price. There are many different candlestick graph patterns that can be used to help traders predict future price movements. Here are some of the most common that you’re likely to see.
The Hammer
The hammer is a bullish candlestick pattern that is formed when the security opens at a high price, falls sharply, but then closes near the opening price. This pattern is often used to indicate that the security has found a bottom and is likely to rise in price.
The Inverted Hammer
The inverted hammer is a bearish candlestick pattern that is formed when the security opens at a low price, rises sharply, but then closes near the opening price. This pattern is often used to indicate that the security has found a top and is likely to fall in price.
The Doji
The Doji is a candlestick pattern that is formed when the security opens and closes at the same price. This pattern is often used to indicate that the security is in a trading range and that the direction of the next move is uncertain.
The Shooting Star
The Shooting Star is a bearish candlestick pattern that is formed when the security opens at a high price, falls sharply, and then closes near the low price. This pattern is often used to indicate that the security is in a downtrend and is likely to fall further in price.
The Bullish Engulfing Pattern
The bullish engulfing pattern is a bullish signal that indicates that the bears have lost control of the market and that the bulls are starting to take over. The bullish engulfing pattern is formed when a small black candle is followed by a large white candle that completely engulfs the black candle. This pattern indicates that the bulls are strong and are pushing the market higher.
The Bearish Engulfing Pattern
The bearish engulfing pattern is a bearish signal that indicates that the bulls have lost control of the market and that the bears are starting to take over. The bearish engulfing pattern is formed when a small white candle is followed by a large black candle that completely engulfs the white candle. This pattern indicates that the bears are strong and are pushing the market lower.
The Inside Day Pattern
The inside day pattern is a bullish signal that indicates that the bulls are in control of the market and that the bears are starting to lose control. The inside day pattern is formed when a small black candle is followed by a large white candle, and the small black candle is completely contained within the large white candle. This pattern indicates that the bulls are strong and are pushing the market higher.
The Outside Day Pattern
The outside day pattern is a bearish signal that indicates that the bears are in control of the market and that the bulls are starting to lose control. The outside day pattern is formed when a small white candle is followed by a large black candle, and the small white candle is completely contained within the large black candle. This pattern indicates that the bears are strong and are pushing the market lower.
Overall, the purpose of candlestick patterns is to reveal more than the verifiable information associated with securities. Learning to read them is an important part of wealth management since they’re able to show the emotions involved with trading by tracking price action over time. This can give experienced traders the knowledge they need to predict how emotions will impact trades in the future, so they’ll be able to make safer moves in the long run.
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