Candlestick pattern in Trading

How to read candlesticks in Charts ?

Candlestick pattern in trading is the most important area where every trader should have understanding of it. Of all pattern in trading, candlestick chart pattern is the most important and we need to consider how candlesticks represent the activities of buyers and sellers and how they affect the price movement and its strength. They identify the suppliers who are more influential in the market but they do not give information on the bargaining power of buyers or sellers behind such movement. But when supplemented with volume, candlesticks provide an understanding of the strength of the buyers or sellers on the market price channel.

What is open price of candlestick?

The opening candlestick price gives the amount or volume of buyers and sellers in the market when the trading session starts at the very beginning of a trading day. It is the opening trade in the market and indicates where an investor would like to begin his trading activities in the given day after reviewing the previous night’s market information. New market sentiments are characterized by the difference between the closing price of the previous day and the opening price of the day. Big volume buyers and sellers tend to make their trades at the opening because this is when the most trading occurs. This makes it an ideal time for them to purchase or sell large quantity of the shares without affecting the stock’s price significantly.

What is high, close and range in candlestick?

The ‘high’ in trading means the maximum price at which a particular stock trades within a particular session. It is the farthest that buyers can go in the negotiation before sellers cut the price down a little. This high level serves as a ‘‘buffer’‘ to the buyers, and thus the price cannot be easily increased. However if the stock ends the session at this high point it means that there was not a lot of pressure from the sellers. However, this is not about buyers not having time to continue to push the price up.

The closing price gives the final position of the balance when the trading was closing for the particular period. The last one is the price at which the buying and selling activities end for any given day’s trading. As the saying goes, it’s always a new day and a lot can transpire between the closing and opening of a market. It also captures the feelings and belief of investor, indicating holdings that are desired to be held through the night till trading starts the next morning. To many investors, the closing price is important as this is the price they are most interested in learning.

What is change or price change in candlestick?

The change describes the difference between a stock’s closing price at one date and the closing price at the subsequent date. Whenever the difference is positive it indicates that there is higher demand in comparison to supply. However, if it is negative, it indicates a condition of we have more supply than demand. It is really useful information about the change in value and this kind of information is very actively sought in financial markets.

In trading, the range means the distance between the highest and the lowest price a specific stock gets to in a specific time, usually within the day. It begins with the day’s high and ends with low. This range is very important when it measures the volatility of the stock price. A wider range means that the stock price can rather be driven by either side of the market; the buyers or the sellers.

Bullish CANDLESTICK: What is Bullish CANDLESTICK ?

This means that when the current candle finishes, its ending price is higher than the ending price of the previous candle.

Bearish CANDLESTICK: What is bearish CANDLESTICK?

When the current closing price/candle is lower than the closing price of the previous candle.

Professional Suggestions:

As for us, the retail traders, we do not have the ability to change anything in the market. Each candlestick has some or the other thought process of the experienced investors. Finally, to ensure we are definitive in understanding whether the actions are driven, premeditated or real, we have to look at the volume of trade. A candlestick shows some information while the rest is in the volume.

Major points to remember in candlestick analysis in trading.

• It is important to focus on the length of the wick – the top or bottom – as this reveals strength, weakness, hesitation and a place where the intelligent money goes.
• No wick suggests rather a positive market sentiment toward the closing price which represent smart active investors.
• When the candle is wide bodied it indicates there is strong market sentiment while if the candle is narrow bodied it indicates weak market sentiment. It might be their observation for a continued move or entry in the opposite direction if a narrow-bodied candle has smart money activity.
• The same type of candle can mean different things based on where it appears in the price trend: in the beginning, middle or at the end of a specific trend, at support or resistance level, or during consolidation. It is very important to dissect the circumstances that surrounded the candle movement. It is also important that one does not make conclusions about the market movement based on the action in one day only. Review the market phase by phase and then try to analyse the last day action according to the given phase.
• Volume is the tool that supports the price action signaled by the candlestick. The first thing is to find out what the formation of the candlestick suggests, then to see whether the volume supports or cancels out the information.

A systematic approach to the formation of patterns and the formative process of Japanese candlestick charting.

1. Get Started:

• These are special bar charts where each bar represents one trading day and displays the opening and closing rates, the highest and the lowest rates at which stocks were traded during the specific day.
• Red or green colors are used to show if the price changed up or down.

2. Know Some Patterns:

• Doji: Indicates unpredictability when the values of opening and closing prices are close to each other.
• Hammer/Hanging Man and Inverted Hammer/Shooting Star: It shows the reversal in price trend most of the times.

3. Understand Pattern Combinations:

• Bullish/Bearish Engulfing, Morning/Evening Star, Three White Soldiers/Three Black Crows: Propose changes or sharp tendencies.

4. Consider the Context:

• Pay attention to patterns at specific price levels or when many trades are happening.

5. Practice Spotting Patterns:

• One of them is a historical chart or on instruments on the trading platform to practice the visualization of patterns.

6. Test and Learn:

• Find out how often patterns performed in order to gauge their effectiveness in the past.

7. Practice Trading Safely:

• Getting familiar with the interface of trading should be done using virtual trading platforms without even involving money.

8. Use with Other Tools:

• Use candlesticks in conjunction with other indicators to get better decision making capabilities.

9. Keep Learning:

• Learn more about chart patterns and indicators in technical analysis.

10. Review and Improve:

• When trading it is important to record all of the transactions in a journal so that you can analyze your good trades and bad ones.

Conclusion

Traders who want to create informed decisions by analyzing market trends should use Candlestick chart pattern as their primary tool. Technical signal confirmation requires using candlestick patterns or candlestick price together with other indicators like moving averages, RSI and volume analysis to better manage trading risks and to have high accuracy in trading. Trading experts and novices alike who learn candlestick patterns develop an advantage in both stock market and forex trading and cryptocurrency operations. Whether you are a professional or new trader you must learn few candle stick pattern like Doji candle, pin bar candle, bullish engulfing and bearish engulfing candle.

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