Top 12 Effective Candlestick Patterns Needed to Become a Successful Trader

Top 12 Effective Candlestick Patterns Needed to Become a Successful Trader

  • A candle holder is an essential tool for crypto trading. It shows the price movement of a particular currency.
  • There are several types of candle patterns. A cheat sheet will help you quickly identify the type of pattern you have.
  • You can also use candlestick patterns in stock and futures trading

When it comes to engineering work, engineering drawing is the backbone. With crypto, however, candle holders are one of the most important tools for minimizing trading losses.

Learning to become a trader could be a challenge. Especially in situations where there are many different paths, methods and strategies. The most popular way traders look for trading opportunities is by observing candlestick patterns. Then what are candle holders and their patterns? The aim of this article is to shed some light on the questions that have long haunted your mind.

What are candle holders?

Candlesticks show information about an asset’s price movement. These charts enable predictions of possible outcomes in a market. A candlestick shows the price movement per day. So if you have 20 trading days a month, 20 candles will show the price movement for the month.

Candlesticks show four points of price movement, namely Open, Close, High and Low Point, depending on the duration of the trader. Many algorithms have the same price information displayed in candlestick charts. It’s worth noting that emotions have a huge impact on trading, which is why using candlestick charts is important.

There are two types of candlesticks: bullish and bearish. Bullish candlesticks can be green or white, while bearish candlesticks are reddish or black.

Left (red) – Bearish candle holders

Right (green) – bullish candlesticks

The structure of a candle holder is such that it consists of a rectangle called a real body. The high and low points are represented by a vertical line protruding from the top and bottom of the real body. They are called a shadow or a wick.

  • Open: This is the point at which the trading session opened. For a bullish candle, the open point is at the bottom of the body, while that of a bearish candle is at the top.
  • Close: This is the point at which the trading session closed. While the closing point for a bullish candle is at the top of the body, the bearish candle has its closing point below the body.
  • High: Here the market reached its highest price during the trading session. You get a picture of how high the market has moved in a trading period.
  • Low: Here the market reached its lowest price during the trading session. It also gives you a picture of how deep the market has moved in a trading period

How do you read a candle holder?

If the top wick of a down candle is short, it means that the current day’s opening was close to the previous day’s high. A brief upper shadow on an upward day dictated the close was near the high. The relationship between the price points of the days i.e. open, high, low and closed determines what the daily candlestick looks like.

Patterns are either bullish or bearish. Bullish patterns show that price is likely to rise, while bearish patterns show that price is likely to fall. No pattern always works because candlestick patterns represent trends in price movement, not guarantees

Candle pattern

Multiple charts help traders find trading opportunities so they know what step to take next and when to take it. These diagrams contain; Line charts, OHLC charts, candlestick charts, bar charts, point and figure charts, etc.

They are mainly used for reading and forecasting the market. But they seemed to take precedence over each other. Before you start trading, it is important to understand the basics of candlestick patterns and how they can affect your decisions. This article is determined to walk you through the most widely used and effective chart for trading, the Candlesticks Pattern Charts.

Candlestick charts are a technical trading tool that packs data for multiple time periods into individual price bars. This gives them priority over all other trading charts. In conclusion, traders use candlestick charts to determine possible price movements based on previous patterns.

The Top 12 Candlesticks Pattern Cheat Sheets

Since there are so many candlesticks out there, it can be awkward for a dealer to memorize and identify them. Candlestick patterns, which are technical trading instruments, have been used for centuries to determine future price direction. It shows how important they are to trading profitably in the market.

There are some candle holders that you need to know about in order to make a profit. If you follow them you will get the basic price action structure of the 12 most effective patterns as listed below.

Bullish candle holders

1) The hammer candle pattern

As the name suggests, it looks a lot like a hammer. It consists of a short body with a long wick under the body. It’s usually at the end of a downtrend. A chandelier indicates that strong buying pressure is reversing the price, despite selling pressure during the day.

2) Inverse hammer candle pattern

A similar bullish pattern is the inverted hammer candle holder. The only difference between the hammer candlestick and the inverted hammer candlestick is that the top wick is longer than the bottom wick. It indicates buying pressure followed by selling pressure that was not strong enough to bring the market price down. The reverse hammer dictates that buyers will soon take control of the market.

3) Engulfing Candlestick Pattern

The bullish engulfing pattern consists of two candlestick reversal patterns that are formed at the end of a downtrend or an uptrend. The first candle is a short red body surrounded by a larger green candle. Although the second day is lower than the first, the bullish market drives the price higher, which leads to buyer success

4) Piercing Candlestick Pattern

The piercing pattern is a two-candle reversal pattern that consists of a long red candle followed by a long green candle. The two-stick pattern indicates strong buying pressure, the price rises above the average price of the previous day.

5) Morning star candle pattern

The morning star candlestick pattern is a sign of hope for a grim downtrend in the market. It’s a three-rod pattern: a short-body candle between a long red and a long green. It signals that selling pressure is easing on day one and a bull market is on the way. Traditionally, the “star” will not overlap with the longer bodies, as the market separates both when opening and closing.

Bearish candlesticks

6) Hanging man candle pattern

The hanging man is the bearish synonym for a bullish chandelier. It has the same shape but is at the end of an uptrend. This indicates a significant sell-off during the day, but buyers could push the price back up. The high sell-off is an indication that the bulls are losing control of the market.

7) Shooting Star Candlestick Patterns

The shooting star has the same shape as the inverted hammer. You can find it at the top of an uptrend: it has a small lower body and a long upper wick. Usually the market deviates slightly as it opens, rising to a daily high before closing at a price just above the open – like a star falling to the bottom.

8) Bearish engulfing pattern

A bearish engulfing pattern takes position at the end of an uptrend. The first candle has a slightly green body that is enveloped by the next long red candle. This means a peak or a slowdown in price movement. This is also a sign that the market downturn is imminent. The meaning of the trend depends on the length of the second candle (how low it is).

9) Even star candle pattern

The evening star is a three-candle pattern that corresponds to the bullish morning star. It’s a short candle that stays between a long green candle and a large red candle holder. It shows the reversal of an uptrend and is especially strong when the third candlestick wipes away the gains from the first candle.

10) Three black crows candle holder patterns

The three black crows candlestick pattern consists of three consecutive long red candles with short or nonexistent wicks. Each session opens at a price similar to the day before, but the pressure to sell keeps the price dropping with each deal. Traders interpret this pattern as the beginning of a bearish downtrend as sellers have overtaken buyers for three consecutive trading days.

Two continuous candle holders

11) Doji candle pattern

The Doji Candlestick pattern is similar to a cross or plus sign and a single candle. A doji alone is a neutral signal and represents the balance between supply and demand. The appearance of this pattern suggests a tug of war in which neither the bulls nor the bears win.

12) Spinning Top Candle Pattern

The spinning top candle pattern has a short body centered between wicks of equal length. The pattern indicates an indecision in the market that does not result in a significant change in price. The bulls pushed the price higher while the bears pushed it back down. Tops mean periods of consolidation after a clear upward or downward trend.

Bottom line

It is important to know which candlestick patterns to look for in different trades. The above candlestick pattern cheatsheet walks you through the different patterns, what they mean, and when to need them. Every day of trading offers forex traders tremendous opportunities. But only intelligent retailers take advantage of these opportunities. We hope this guide will help you on your trading journey.

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