Top 10 Candlestick Patterns To Trade the Markets

Top 10 Candlestick Patterns To Trade the Markets

Candlestick patterns are important tools in technical trading. Understanding them allows traders to interpret possible market trends and form decisions from those inferences. There are various types of candlestick patterns which can signal bullish or bearish movements. This article will briefly touch upon what candlestick patterns are and introduce the top 10 formations all traders should know to trade the markets with ease.To get more news about WikiFX, you can visit wikifx.com official website.

  WHAT ARE CANDLESTICK PATTERNS?

  A candlestick is a single bar which represents the price movement of a particular asset for a specific time period. The information it displays includes the open, high, low and close for that time period. Candlestick patterns take into account one or more candlesticks to assist technical traders in developing inferences about future movements and price patterns of the underlying asset. These are displayed graphically on a chart, which is utilized for market analysis. Our guide to reading candlestick charts is a great place to start to learn how to interpret candlesticks for trading.

  CANDLESTICK PATTERNS CAN BE BULLISH OR BEARISH

  In order to recognize and apply the most commonly used candlestick patterns to a trading strategy, traders need to understand how the inclination of these patterns can affect the market direction (trend). The tables below summarize the two main categories of price movement that candlesticks can indicate. Many of these patterns are featured in our top 10 list below. 1 - EVENING STAR AND MORNING STAR

  The evening and morning star candlestick patterns occur at the end of upwards/downward trends respectively and tend to indicate reversal patterns.

  The names come from the star shaped formation of the arrangement.

  As you can see from the image below, the first candlestick is in the direction of the trend, followed by a bullish or bearish candle with a small body. The third candlestick is seen in the direction of the reversal, ideally closing passed the halfway point of the first candlestick.

  Trading this candlestick pattern will require a confirmation candle in the direction of the respective reversal – for example, traders will look for a bearish candle after the evening star. 2 - BULLISH & BEARISH ENGULFING

  A bullish or bearish engulfing candlestick pattern may indicate reversal patterns.   A bullish engulfing candlestick formation shows bulls outweigh bears. As the pattern below shows, the green body (bulls) covers completely the first candlestick (bears).   A bearish engulfing candlestick pattern is small green (or bullish) candle followed by a larger red (bearish) candle immersing the small green candle. 3 – DOJI

  The Doji candlestick chart pattern is associated with indecision in the market of the underlying asset. This could mean potential reversal of the current trend or consolidation.   This pattern can occur at the top of an uptrend, bottom of a downtrend, or in the middle of a trend.   The candlestick itself has an extremely small body centered between a long upper and lower wick.