Candlestick Patterns Every Trader Should Know About

Posted by Ethan Brown on January 1st, 2022

Traders who trade stocks or other financial instruments love to use candles in their trading platform as they are a great visual representation of how price has behaved for some time.

The candlestick consists of the so-called \"body\" of the candlestick - the range between the opening and closing prices, representing the high and low of this period. A candlestick body can form after it opens at the low and closes at the high. In other cases, when there is high volatility, the candlestick body can be formed by sufficiently strong price movements in a certain range.

Candlesticks can serve as a key to understanding not only price movement, but also market sentiment for a particular stock or index. For example, bullish sentiment can be talked about if a candlestick is formed, in which the stock falls after the opening, tests the support level, bounces off it, and closes at the maximum. You can check this post by clicking on the link to know about candlestick patterns https://patternswizard.com/technical-analysis/patterns/candlestick-patterns/ 

Many charting platforms can recognize candles and scan stocks for trading candidates. But you can\'t rely solely on computer technology; the trader must be familiar with various candlestick patterns.

Bullish engulfing candle

A bullish engulfing candlestick pattern occurs when a stock price movement encompasses the previous day\'s high and low. That is, it absorbs it. Typically, this pattern tells the trader that the price, having moved down, found support or a lot of buying, and then went up, breaking through the previous day\'s high. Such a candle can often confirm the stability of an uptrend or indicate a change in a downtrend.

Bearish engulfing candle

The bearish engulfing candlestick pattern is the opposite of the previously discussed bearish engulfing candlestick pattern. In this case, the price tests the level above the high of the previous day, and then, finding there a large volume of sales, it goes down sharply, breaking through the low of the previous day. A formation of this type can serve as confirmation of a steady decline in prices or evidence of a trend change.

A bearish engulfing candlestick can occur at the top or during an existing trend and indicates a continuation of the downtrend.

Hammer reversal candlestick pattern

When market participants reject a support or resistance level abruptly, a hammer pattern can form. In the example below, the price declined but found support or buying volume. At this point, the control over the price passed to the bulls, as a result of which the candlestick closed in the area of ??its opening level. You can also search about harmonic patterns at here https://patternswizard.com/technical-analysis/patterns/harmonic-patterns/ 

Doji 

Doji refers to a candlestick pattern that indicates hesitation in a stock\'s movement. As a rule, these patterns are formed in the zones where bulls and bears fight for the further direction of price movement.

The Doji candle characterizes a very small body; that is, the closing prices are very close. At the same time, it may have long wicks, which indicate that levels above and below have been tested but not accepted. This pattern indicates the uncertainty and indecision of the movement, as well as the fact that bulls and bears are fighting to control the price. Often, after the breakdown of this candlestick, a steady upward or downward movement occurs.