What is CandleStick?
Candlestick Patterns are representation of price movement during a certain period of time. it can be minute, hour days or weeks. Candlestick is a chart type which shows four positions in one candle that is High, Open, Close, Low. High and Low values showed by Shadow/wick and Real body shows the opening and closing of Candle or stock. Candles are selected by time like 1 min, 5 min, 30 min, 1 hr etc. Human Nature is same all around the world so candle stick charts are also same in whole world. you can predict the next pattern by just watching the candle chart.In Technical Analysis of Stocks, Forex, Comodities and Digital Currency, a Chart Pattern is very common. It is called Candlestick Pattern. You can see the image below for Candlestick.
How to Read Candlestick
Candlestick reading is always along with timeframe. if candle is green, it means in this perticular time frame price increased. and if candle is red then price decreased in particlular timeframe. above image clearly shows opening closing high and low of both red and green candlestick. if timeframe for candlestick chart is 5 min than one candle shows price movement in 5 minutes. Open shows opening of stock in 5 min period. Close shows closing price in that particular 5 min period. similarly High is highest price and low is lowest price in this 5 min perios.
There are 3 types of candlesticks.
- Momentum Candlesticks
- Long whip Candlesticks
First Type of candlestick is Momentum candlestick which shows the momentum of price only. Strong momentum means next candlesticks will follow same trend. and weak momentum means next candlestick may change trend.
Long whip candlestick
Longwhip candlestick as name shows, it has long whips or shadows and they are on one side. as shown below
in picture above you can understand how it looks. it is usually the trend reversal candlestick. it can both in red or green. and it usually reverse the trend.
Dogis are cnadle sticks which shows indecision. they have long whips and no body. they are potentily trend reversal candles.
Candlestick Patterns you need to know
What are candlestick Patterens. Candlestick Patteren considered as multiple candlesticks which form specific shapes and we recognize them and use them for our advantage. Candlestick patterns mimics human behavior, and human behavior is same everywhere so you can rely on it to predict the next outcome.
We will discuss most used candlestick patterns that can give you good understanding. Below is chart which will help you undertanding Patterns
Above Picture shows some famous candlestic patterns for bullish reversal. That are used in Technical Analysis. we will discuss these patterens in our strategy. below image shows some patterns for bearsih Reversals.
Now we have seen some patterns so we will apply them on graphs. and we will show you a strategy that will work for you 90% of time. Once you are fimiliar with candlestic Patterns, Open the Candlestick chart and enter below indicators
- EMA (setting at 200 for long term and 20 for short term)
- RSI (check if below 30)
see below graph for more understanding Shooting Star
Treat EMA Line for support/resistance. and apply candlestick patterns shown. check RSI and you have be 80% results as expected. Technical Analysis is for entry and exit points. for stock selection please check Fundamental Analysis. In order to view these charts, you can visit tradingview.com.
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