Candlestick Patterns | Charts | Cheetsheat | Charting techniques | Analysis | Hammer | Shooting Star | Inverted Hammer | Doji | Bullish | Bearish

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Hello…how are are you?

Well, today in this article I am going to cover one of the most important chapters in the field of trading i.e Candlestick Patterns.

No doubt How to read candlestick chart? and understanding Candlestick Patterns properly is one of the most skills that every trader must know and learn.

So, keep reading ahead Japanese Candlestick Patterns | Charts | Cheetsheat | Charting techniques | Analysis | Hammer | Shooting Star | Inverted Hammer | Doji | Bullish | Bearish

What is Candlestick?

Japanese Candlestick is a graphical representation of the price movement of stocks, commodities & more.

The chart shows the emotion of buyers and sellers representing the size of price movement with red and green colours.

History

 

In 1700, a Japanese rice trader named Munehisa Homma discovered that there was a link between the price, supply and demand of rice.

 

However, The chart was introduced in the western world by Steve Nison, when he wrote a book named Japanese Candlestick charting technique.

Japanese Candlestick Charting Techniques: How to Read Candlestick Chart?

Here, To illustrate How to read candlestick chart for day trading?  I am going to use IQ Option.

If you don’t have an IQ Option account Click Here.

You can also sign up via the form given below.

 

You can sign up here try…

Once you click the link above you will land on the IQ Option homepage.

 

Now, enter your email, password & click try now.

Once you have signed up. You will land on the IQ Option dashboard.

 

Now, click on chart type and select Japanese candlestick from the menu.

 

 

That’s it the basic setup is over!! your dashboard will look something like given below.

 

Candlestick Analysis

Just like a bar chart, a candlestick chart also shows the market open, high, low, close, for the day.

Before, we move ahead let’s check few trading terms.

Body: It represents the open to close range.

Wick or Shadow: It represents the Intraday High and low.

Bullish Candle: It represents the buyer’s candle.

Bearish Candle: It represents the seller’s candle.

Closing Price: It is the last price that anyone pays for a particular stock during business hours.

Opening Price: It is the opening price of a stock when the market opens.

 

Candlestick analysis is not very difficult.

The golden rule of the candlestick says:

  • If the opening price is higher than the closing price then a Red candle is formed.

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  • Similarly, If the closing price is higher than the opening price then a green candle is formed.

Example:

 

Suppose The price of Sugar today (Opening Price) is Rs. 45 which is greater than yesterday’s price (Closing Price)  of Rs. 43.

Now, If you are an intelligent seller what will you try to do is SELL more and more. because of which a very strong Red candle will appear.

Similarly, Suppose The price of Sugar today (Opening Price) is Rs. 43 which is lower than yesterday’s price (Closing Price)  of Rs. 45.

Now, If you are an intelligent buyer what will you try to do is BUY more and more. because of which a very strong Green candle will appear.

 

 

Candlestick Patterns: Hammer Candlestick Pattern

Hammer Candlestick Pattern is one of the most popular reversal candlestick patterns that is used by traders to find possible uptrends in the market.

The Hammer candlestick pattern has a short body with a long shadow.

This candlestick pattern signals that the price of the security might rise and the market is trying to find its bottom.

According, to the experts we should always use an alternative indicator to confirm your trade with a hammer candlestick pattern.

Price Action:  If we spot the Hammer Candlestick Pattern we should go for a buy trade.

Shooting Star Candlestick

Shooting Star is one of the most popular reversal candlestick patterns that is used by traders to find the possible downtrend in the market.

The Shooting Star has a small body with a long tail and it just looks like a shooting star.

This candlestick pattern comes after a strong uptrend that signals that sellers are trying their hardest to push the market down.

However, If you want to gain better results with Shooting star you should always use an alternative indicator to confirm your trade.

Price Action: If we spot a shooting star after a strong uptrend then we should go for a sell trade.

 

Inverted Hammer Candlestick

The Inverted Hammer Candlestick Pattern is one of the most popular candlestick patterns that is used by traders to find the possible uptrend in the market.

Inverted hammer candlestick pattern comes after a strong downtrend that signals that the buyers are trying their hardest to push the market into an uptrend.

This candlestick pattern has a small body with a long tail and is really easy to spot as it looks just like an inverted hammer.

It is always recommended by experts to use an alternative indicator with a shooting star to confirm your trade.

Price Action: If we spot an Inverted Hammer Candlestick Pattern we should go for a buy trade.

 

Spinning Top Candlestick

The spinning top candlestick pattern is one of the most popular candlestick patterns used by traders to find possible uptrends or downtrends.

The spinning top candlestick has a small body with a big shadow.

This candlestick pattern indicates indecision in the market between buyers and sellers.

Price Action:

If we see a spinning top candlestick after a strong uptrend that means the market can go into a downtrend.

So, here we should go for a sell trade.

Similarly, If we see a spinning top candlestick after a strong downtrend that means the market can go into an uptrend.

So, here we should go for a buy trade.

Doji Candlestick

Doji Candlestick is one of the most popular candlestick patterns used by traders to find a possible uptrend or downtrend.

A Doji candlestick pattern indicates that buyers and sellers are trying their best to swift the market.

Price Action:

If we see a Doji candlestick after a strong uptrend that means the market can go into a downtrend.

So, here we should go for a sell trade.

Similarly, If we see a Doji candlestick after a strong downtrend that means the market can go into an uptrend.

So, here we should go for a buy trade.

However, we should use an alternative indicator to confirm your trade.

Final Point:

The Candlestick analysis is a graphical representation of stocks, commodities & more.

This chart represents the emotion of buyers and sellers by a series of candles placed together.

Candlestick Analysis and How to read candlestick chart? is very easy.

You just need to remember the golden rule of the candlestick.

In this article, I have also shared the important reversal candlestick patterns that all must know.

So, this is the end of this article. I hope you have found this article helpful.

If you still have any problems. mail us at [email protected]

Till then best of luck 🙂

 

 

 

 

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