Candlestick patterns explained with examples pdf

Candlestick patterns explained with examples. Explain candlestick patterns. Candlestick patterns explained with examples in tamil pdf.

Financial technical analysis tools that depict daily price movement information that is shown graphically on a candlestick chart Candlestick patterns are a financial technical analysis tool that depicts daily price movement information that is shown graphically on a candlestick chart. A candlestick chart is a type of financial chart that shows the price
movement of derivatives, securities, and currencies, presenting them as patterns. Candlestick patterns typically represent one whole day of price movement, so there will be approximately 20 trading days with 20 candlestick patterns within a month. They serve a purpose as they help analysts to predict future price movements in the market based on
historical price patterns. As for quantity, there are currently 42 recognized candlestick patterns.

All of which can be further broken into simple and complex patterns. Understanding Candlestick Patterns Financial technical analysis is a study that takes an ample amount of education and experience to master. For simplicity, we will be talking about the basic patterns to be aware of when viewing candlestick charts and what the patterns may be
predictive regarding price movements. Before delving into the implications of each pattern, it is important to understand the difference between bullish and bearish patterns. For reference, Bloomberg presents bullish patterns in green and bearish patterns in red. Bearish Patterns Bearish patterns are a type of candlestick pattern where the closing
price for the period of a stock was lower than the opening price. This creates immediate selling pressure for the investor due to a price decline assumption. Bullish Patterns Bullish patterns are a type of candlestick pattern where the closing price for the period of a stock was higher than the opening price. This creates buying pressure for the investor
due to potential continued price appreciation. Bullish Hammer (H) Presented as a single candle, a bullish hammer (H) is a type of candlestick pattern that indicates a reversal of a bearish trend. This candlestick formation implies that there may be a potential uptrend in the market. Some of the identifiable traits and features of a bullish hammer
include the following: A candle with a short body and a long wick (roughly +2x the size of the candle) Little to no wick on the short-end side Can be either red or green, depending on the strength of the price reversal Formed when the open, low, and close are approximately the same price Occurs at the bottom of a downtrend Indicates an upward
trend reversal (price may increase) A bullish candlestick pattern is a useful tool because it may motivate investors to enter a long position to capitalize on the suggested upward movement. Inverted Hammer (IH) Also presented as a single candle, the inverted hammer (IH) is a type of candlestick pattern that indicates when a market is trying to
determine a bottom. As the name suggests, the inverted hammer shares the same design as the bullish hammer candlestick pattern, except it is flipped invertedly.
An inverted hammer candlestick pattern may be presented as either green or red. Green indicates a stronger bullish sign compared to a red inverted hammer. Some of the identifiable traits and features of an inverted hammer include the following: A candle with a short body and a long wick (roughly +2x the size of the candle) Little to no wick on the
short-end side Can either be red or green, depending on the strength of the price reversal Formed when the open, low, and close are approximately the same price Occurs at the bottom of a downtrend Indicates rejection of lower prices (at some specific level) Identifies a favorable entry point Identifies a favorable entry point In comparison, both the
bullish hammer and the inverted hammer candlestick pattern are similar in nature. But each design signifies a slightly different directional trend. Engulfing Line (EL) An engulfing line (EL) is a type of candlestick pattern represented as both a bearish and bullish trend and indicates trend continuation. In order to be a bearish engulfing line, the first
candle must be bullish in nature, while the second candle must be bearish and must be “engulfing” the first bullish candle. Comparatively, a bullish engulfing line consists of the first candle being bearish while the second candle must be bullish and must also be “engulfing” the first bearish candle.
This is shown in detail with the diagram below: As for financial indication, a bearish engulfing line represents a bearish trend continuation (lower prices to come), while a bullish engulfing line suggests a bullish trend continuation (higher prices to come). Harami (HR) The Harami (HR) candlestick is a Japanese candlestick pattern that may suggest
either potential price reversal or bearish/bullish trend continuation. Translated from Japanese, Harami means “pregnant,” shown through the first candle, which is considered “pregnant.” The Harami candlestick is identified by two candles, the first of which being larger than the other “pregnant,” similarly to the engulfing line, except opposite. This is
shown for both a bearish situation and a bullish situation. When there is a bearish Harami candlestick present in the market, this may suggest a potential downward price reversal in the near future. As for a bullish Harami, this candlestick formation may suggest that a bearish trend may be coming to an end, which can result in some upward (bullish)
price reversal. Piercing Line (PL) The piercing line (PL) is a type of candlestick pattern occurring over two days and represents a potential bullish reversal in the market. For further clarification and learning, a bullish reversal would indicate a potential reversal from a downward trend in price to an upward trend in price. Three important
characteristics of the piercing line exist. These being the fact that there must be a downward trend before the pattern, a gap after the first day, and an evident reversal on the second-day candlestick in the pattern. For reference, there is a diagram depicting what a piercing line may look like. Most commonly, the piercing line pattern is located at the
bottom of a downtrend.
Considering prices are experiencing a downward motion, it prompts buyers to influence a trend reversal in order to push prices higher. The positioning of the two candlesticks is important. The second-day candlestick must have an opening lower than the first-day bearish candle.
As mentioned, the downtrend causes buyers to drive the price higher, which should be above 50% of the first-day candlestick. Overall, the piercing line is a lucrative financial analysis candlestick that is much more commonly accepted and studied than other patterns. Related Readings To keep learning and advance your career, the following resources
will be helpful: Chart patterns are graphical representations of repeating price action setups that occur quite often in financial markets.
These patterns are formed naturally on trading charts and… there are lots and lots of them. So, for most beginner traders, it’s a serious headache to learn all of these chart patterns and recognize them instantly on a price chart. Of course, some are easier to identify, while some are more complex. Those that are more complex are advanced chart
patterns, and they are, as expected, more difficult to be recognized on charts. But everything has a solution. The only thing a beginner trader needs at the beginning of a trading journey is to survive the first few months and learn as much as possible. And an excellent tool to do that is using cheat sheets. So, to help you take the first steps in the right
direction, here, we will share our advanced cheat sheet candlestick patterns so you can use it whenever you need.
Below, you can download for free our advanced cheat sheet candlestick patterns categorized into advanced bullish bearish candlestick patterns: Advanced Cheat Sheet Candlestick Patterns PDF [Download] In essence, advanced chart patterns are not different from standard chart patterns. They signal that the price of an asset is likely to move in a
specific direction based on a repetitive pattern and past data. To make things more organized, you need to remember that chart patterns are categorized into: Bullish reversal patterns Bearish reversal patterns Bullish continuation patterns Bearish continuation patterns Now, the only difference is that advanced candlestick patterns are a bit more
complex to recognize on a price chart than basic candlestick price action patterns. They often have a complex structure and more strict rules on where and when to enter and exit a trade. For example, a Doji candlestick pattern is a basic chart pattern as it is a single candle pattern that can be easily recognized on candlestick charts. However, other
patterns require a more in-depth understanding of the pattern’s structure, meaning, and how to use it properly. Such an example is the Wyckoff pattern, which is not only a chart pattern but also a theory. And when you trade a financial instrument using the Wyckoff pattern, you should know how to locate it and use it to find trading ideas. Another
advanced chart pattern is the Parabolic pattern. Once again, when trading this bearish candlestick pattern, you need to know how to identify the formation of the pattern naturally and know where and when you should enter and exit a position. Notably, harmonic chart patterns can also be classified as advanced candlestick patterns.
Learning harmonic chart patterns is far more complex and not favorable for all traders; however, they are also arguably the most accurate and reliable chart patterns, especially for short-term trading techniques. So, if you are keen to learn how to use harmonic chart patterns, we suggest you read our harmonic chart pattern guides and download our
harmonic patterns candlestick cheat sheet. Overall, every chart candlestick pattern you learn will be valuable if you rely on technical analysis to predict price movements in stock, commodity, or forex trading. Nonetheless, you must always use other technical analysis tools to confirm the trade. Those include Fibonacci support and resistance levels,
technical indicators, and trend lines. Mimic how professionals trade. Discover your inner talent. Learn everything you need to know about trading the markets from beginner level to the most advanced, helping you to create critical skills and techniques to you can apply in your trading right away. The following advanced candlestick patterns are the
most common to look out for when using technical analysis to trade financial assets. Developed in 1930 by Richard Wyckoff, the Wyckoff candle pattern is one of the most valuable technical analysis methods to predict future price movements and find market trends. According to the Wyckoff theory, price action moves in a cycle of 4 phases –
markdown, accumulation, markup, and distribution. The bullish and bearish engulfing candlestick pattern is a chart pattern that signals a possible market reversal. It is a two-candle pattern that may occur in either an uptrend or downtrend on any instrument and time frame.
Engulfing patterns come in two types: bullish and bearish. At its core, the bullish island reversal formation suggests that the price action trajectory is due to a change in course. Accordingly, it is classified as a reversal indicator. The Island reversal patterns come in two types: bullish and bearish. The three inside down is a bullish trend reversal chart
pattern made of three consecutive candles – a long bearish candle, followed by a bullish green candlestick that is at least 50% of the size of the first candlestick and a third candle that closes above the second candle. The bullish rectangle is a continuation candlestick pattern that occurs during an uptrend when prices pause before continuing upward.

It is a chart formation developed when the price moves sideways, creating a range, and there’s a temporary equilibrium before the next price movement. Along with the bearish version, they are known among the most accurate continuation candlestick patterns in technical analysis. The upside gap three methods is a bullish continuation chart pattern
that appears during an ongoing uptrend. At basic, the theory behind this classical chart pattern is that the gap represents the profit-taking mode during an existing trend before the rally continues. The pattern is confirmed as soon as the third candlestick fills the gap, and then, the previous trend is likely to continue in the same direction. The three
black crows and three white soldiers chart patterns are bearish or bullish reversal candlestick patterns. Both consist of three consecutive, relatively long candlesticks that occur during an uptrend or downtrend. Traders view three black crows as a potential reversal signal. Bullish and bearish breakaway patterns are multi-candle chart formations that
suggest a market reversal may occur. An actual breakaway is a five-candlestick formation that occurs in either an upward or downward trend and signals a trader to enter a position in the opposite direction. The rising and falling windows are chart patterns that consist of two candles in the same direction with a gap between them. As a gap in trading
is a strong sign of high volatility and new developments in the market, these patterns are considered reliable and accurate in predicting the next price movement.
The bearish and bullish harami candle pattern is a Japanese candlestick formation formed at the bottom (bullish harami) or top (bearish harami) of an ongoing trend and indicates that the trend is likely to reverse.

In appearance, the pattern consists of two candles, one after the other, with the first candle having a long body and short upper and lower wicks and the second candle having a very small body. Clearly, Japanese candlestick patterns are an excellent way to predict future price movements.
They provide signals that will help you understand price action, and ultimately, find trading opportunities. Therefore, you should equip yourself with knowing as many patterns as possible to get a better grasp of how assets’ prices move and learn how to analyze the markets correctly. To start, download our basic Japanese candlesticks chart patterns
cheat sheet where you can find the most widely used and conventional candlestick chart patterns. Additionally, use our free advanced candlestick patterns cheat sheet above to expand your chart patterns knowledge. Mimic how professionals trade. Discover your inner talent. Learn everything you need to know about trading the markets from
beginner level to the most advanced, helping you to create critical skills and techniques to you can apply in your trading right away.