Candlestick patterns 

Candlestick patterns is a technical analysis tool which predicts price direction based on past patterns and sometimes single candlestick pattern will be powerful enough to give trading signals. Every pattern is attached with risk. It helps trader in choosing what should be his entry point, stop loss and target price.  Candlestick patterns can be categorized into single candlestick pattern and multiple candlestick pattern. Most of the names retain Japanese names.

Some of the major single candlestick pattern are :

1. Doji
2. Spinning tops 
3. Hammer
4. Hanging man
5. Shooting star
6. Marubozu

Some of the major multiple candlestick patterns are:

1. Engulfing pattern
2. Harami
3. Piercing pattern
4. Dark cloud cover




For instance, we can identify doji and engulfing pattern in the above HDFC chart. Detailed explanation will be given in the further posts. Proper education regarding these candlestick patterns will help us identify during live trading and will enable us to take proper position  and decisions which will result in profitable opportunities. 


Assumptions attached to Candlestick patterns:

1. Bullish candle represents Strength and Bearish candle represents Weakness.

2. It is important to be flexible with candlestick patterns as minor variations need to be made owing to the market conditions and hence it is impossible to follow everything as per text book rules.

3. Look for a prior trend i.e. if you are looking for bullish pattern then prior trend should also be bullish and if looking for bearish then prior trend should also be bearish except for some powerful single candlestick patterns like Maribozu where prior trend need not be considered which will be explained later.

All the candlestick patterns mentioned above will be explained in detail in coming posts along with examples for better understanding. It is so important to know them as it helps us in different levels like entry point, to set stop loss and to set our targets too. Also, any smart investor/trader should follow a particular method of trading which will include a set of rules to be followed without which it is just pure gambling. Anything done without any logic or knowledge will not give any consistent profits so one must always aim to constantly update themselves as this market never behaves in a certain way.







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