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Basics Of Candlestick Patterns For Beginners

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By Author: Akash Bangare
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Day trading is an effective way to make money online. It allows traders to take benefit of the stock market and boost their financial gain. This approach to trading involves looking at market trends and seeking out trading opportunities via technical analysis.
Technical analysis involves studying past market data to anticipate future price movements. This examination includes looking at patterns in price movements, trading volume, and other market signals to recognize when to buy and sell. Traders use these analyses to decide when to enter and exit the market.
Candlestick analysis is one of the most widely used tools in technical analysis, and there are many other tools employed as well, such as trendlines, moving averages, and momentum indicators.
What are candlesticks?Candlesticks are a type of chart used in technical analysis to track the price activity of security. They are comprised of a series of vertical lines representing a security's high, low, opening, and closing prices during a specific time. Candlesticks can provide valuable insights into a security's market sentiment and help identify potential ...
... trading opportunities.
Beginner Guide 2022 Candlesticks Patterns
A candlestick has three main components: an upper wick, a body, and a lower wick.
Upper wick: An upper wick is the part of the candlestick that extends above the body. The upper wick indicates the highest price reached during the candle's specific period.
Body: The candle's body is typically rectangular, with the top and bottom representing the opening and closing prices, respectively. The larger the body, the greater the price movement.
Lower wick: A candlestick has a lower wick, the bottom part of the candle. The lower wick typically indicates the lowest price reached during the period that the candle represents.
Types of CandlesticksThree distinct types of candlesticks are bullish, bearish, and neutral.And there are 35 powerful candlestick patterns distributed across these three types.
Bullish Candlestick: A Bullish Candlestick indicates an uptrend. It consists of a wide range of candlestick patterns that occur when the opening price is lower than the closing price, indicating that the buyers managed to push the price up during the period. A bullish candlestick usually has a white or green color, indicating an increase in price over a given period.
Bearish Candlestick: A Bearish Candlestick indicates a downtrend. It is composed of a vast part called the "real body," which indicates the range between the open and close, and a thin line above and below the real body representing the high and low. A bearish candlestick usually has a black or red color, indicating a decrease in price over the given period.
Neutral Candlestick: In Neutral Candlestick, the opening and closing prices are equal or nearly equal. This pattern typically occurs when the market is indecisive, needing more strength to move up or down. As a result, the price of the security remains relatively unchanged. A neutral candlestick usually has no color, indicating indecision in price over a given period.
How to read Candlesticks?One should first identify the open, high, low, and close of the time being analyzed to read candlesticks. These components make up the candlestick's body, which can be either red or green. A red candlestick indicates a price decline, while a green candlestick indicates a price increase. The wicks above and below the candlestick's body show the highest and lowest prices traded during the given time. Understanding how to read candlesticks can help traders identify trends in the market and make informed decisions.
Refer to the image provided for further clarity:
What are candlestick patterns?We have already understood what a candlestick is, the different types of candlesticks, and how to read them. Now, let's explore what candlestick patterns are.
Candlestick patterns are graphical representations of stock price movements over a given period, and these patterns can be used to make trading decisions. Understanding these patterns can help traders to predict whether stock prices are likely to rise or fall.
They provide insight into the psychology of the market and can help traders identify possible entry and exit points. By recognizing and understanding candlestick patterns, traders can gain an edge in the markets.
35 powerful candlestick patterns as per their types
Bullish Candlestick PatternsThese patterns typically appear in the form of a single candle or a series of candles and often include closing prices that are higher than their opening prices. Bullish candlestick patterns can provide investors with valuable information about likely future trends and help make informed trading decisions.
12 Bullish Candlestick Pattern:Bullish EngulfingHammerInverted HammerMorning Star PatternPiercing PatternThree White SoldiersBullish HaramiThree Inside Up PatternTweezer BottomOn-Neck PatternThree Outside UpWhite Marubozu candlestickBullish Counterattack
Bearish Candlestick PatternsThese patterns indicate a downward price trend and can be used to help traders make informed decisions when trading securities. They typically include long shadows, small bodies, and patterns such as the bearish engulfing pattern and the dark cloud cover. Knowing these patterns can help traders spot potential reversals and capitalize on them.
12 Bearish Candlestick Pattern:Bearish EngulfingHanging ManShooting StarEvening Star PatternThree Black CrowsDark Cloud Cover PatternThree Inside UpTweezer TopBearish CounterattackThree Outside DownBlack MarubozuBearish Harami
Neutral Candlestick Pattern:The Neutral Candlestick Pattern signifies indecision in the market. It indicates that neither the bulls nor the bears have been able to gain control of the market, and the resulting price movement is sideways. This candlestick pattern consists of a single candle to three candles.
10 Neutral Candlestick Patterns:DojiFalling Three MethodsHigh WaveRising Three MethodsRising WindowFalling WindowUpside Tasuki GapDownside Tasuki GapMat HoldSpinning Top
Conclusion Learning the basics of candlestick patterns is essential to any trader's journey. Candlestick patterns can provide insight into the market sentiment and potential trading opportunities. With a bit of practice and understanding, candlestick patterns can be used to make informed trading decisions and increase your chances of success.
Technical analysis involves becoming familiar with charts, indicators, and more. Acquiring these skills can take some time, so take your time with the process.
Happy Learning & Happy Trading.

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