Candlestick Patterns — Different Types of Patterns — Explained

A stock market is a market where people buy and sell shares of companies. It’s a great way to invest your money, but getting started is not easy. You need to know how to read financial reports, and you need to know when to sell and buy shares. There are many ways to invest in the stock market, so you should choose the best method.

There are many types of stock trading, and intraday trading is one of them. In intraday trading, traders analyze stock charts to predict future price movements. This is known as technical analysis.

To gain expertise in intraday trading, traders may use different strategies involving data to learn different market trends, changing market sentiments, and overall stock price momentum.

This is part of technical analysis, and technical analysis involves the usage of tools like candlestick patterns. Read More to understand more about candlestick patterns. But before I explain candlestick patterns, let me explain what technical analysis in the stock market is.

What is technical analysis?

Technical analysis in the stock market uses past market data to predict future market behavior. Technical analysts believe that the collective actions of all the participants in the market, both human and computerized, establish patterns that can be analyzed for clues about where the market is headed.

Technical Analysis uses this type of data:

• Historical performance of the stock price
• price movements
• volume

Technical analysis is different from fundamental analysis; fundamental analysis uses financial data, But Technical analysis uses different charts and patterns to predict price movements.

What are candlestick charts?

Candlestick charts are financial graphs that visualize an asset’s opening, closing, high, and low prices over a specified time. They are popular among traders because they clearly show price action.

A candlestick is made of three parts: the upper wick, the body, and the lower wick.

The upper wick on a candle represents the highest price made by that particular candle, while the lower wick represents the low. The candle’s body is in between the upper and lower wick, representing the opening and closing price for that candle.

Different types of candlestick patterns

Candlesticks can be used to show patterns in stock prices, which can help predict whether the price will go up or down. Candlestick patterns are just one tool that traders use to make decisions.

Three types of candlestick patterns are bullish, bearish, and neutral. These three types have 35 powerful candlestick patterns that can be used to signal future price movement.

Bullish Candlestick Patterns:-

A bullish candlestick is a candlestick that indicates the price is moving up. The Bullish candlestick patterns are primarily shown in the green and white color, but in some patterns, the color of the body doesn’t matter.

These are some most known bullish candlestick patterns:

• Bullish Engulfing Pattern
• Hammer
• Inverted Hammer
• Morning Star
• Piercing pattern
• Bullish harami

There are many more patterns; you can check them on chartingskills.com

Example of Bullish Candlestick Pattern:

Bearish Candlestick Patterns:-

A bearish candlestick is a candlestick that indicates a price decrease. The bearish candlestick patterns are primarily shown in red and black colors, but in some patterns, the color of the body doesn’t matter.

These are some most known Bearish candlestick patterns:

• Bearish Engulfing Pattern
• Hanging Man
• Shooting Star
• Evening Star
• Dark Cloud Cover pattern

Example of Bearish Candlestick Pattern:

Doji Candlestick Pattern:-

The Doji candlestick pattern is a neutral pattern that indicates indecisiveness in the market among traders. The Doji doesn’t have a body; its opening and closing prices are the same.

Conclusion

These are the three types of candlesticks. Once traders know how to read a candlestick, understanding price movements is easy for the stocks or index. There are many things in technical analysis, but basic understanding, such as candlestick patterns, is essential.