Candlestick patterns provide technical traders with visual clues about investor sentiment and can signal potential reversals in trend. Some key reversal patterns include the hammer, hanging man, morning star, and evening star formations. Traders watch for these patterns to form at support/resistance levels or trendlines as potential entry signals. While candlesticks don't provide price targets, confirming patterns with technical analysis helps traders identify high probability trade setups. Proper risk management using stop losses is also important when trading candlestick reversal signals.
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2. Dow Theory: Father of Technical Analysis
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3. [Anatomy of
a Candlestick]
Basic Candlestick
:
Upper Shadow
ο± Upper Shadow
ο± Real Body
ο± Lower Shadow
Real Body
βTechnical Analysis β
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14. Where to look for a Pin Bar Candlestick ?
1) Previous major swing highs or swing lows
2) Any major levels of Support and Resistance
3) Trend Lines
4) At Fibonacci levels
**Where there is strong confluence or a
combination of many of the above points
15. Candlestick Pattern - Definition
What is a Morning Star Pattern?
A true morning star pattern is a bullish reversal signal, and
therefore, only occurs after an established downtrend in price.
Traders vary on what they consider to be a downtrend. Some
require lower highs and lower lows, while others require only a
short streak of consecutive lower candlesticks.
16. Well, here is my fovourite candlestick patters which i use to trade everyday:
Bullish Reversal
1. Shooting Star
2. Bullish Engulfing
3. Bullish Abandoned Baby
4. Piercing Line
5. Morning Star
Bearish Reversal
1. Hammer
2. Bearish Engulfing
3. Bearish Abandoned Baby
4. Dark Cloud Cover
5. Evening Star
17. Abandoned Baby pattern
The Abandoned Baby pattern is a rare occurrence but highly reliable.
It's a major reversal pattern, similar to the island reversal chart
pattern.
18. Bearish Abandoned Baby
β’ Reversal pattern
β’ Appears after a strong uptrend
β’ Formation of 3 candles
β’ 1st candle is a long green candle in the direction of the trend
β’ 2nd candle is a Doji gapping away from the candles on each side
β’ There must be no shadows or body overlapping the Doji
β’ 3rd candle is a long red candle
Bullish Abandoned Baby
β’ Reversal pattern
β’ Appears after a strong downtrend
β’ Formation of 3 candles
β’ 1st candle is a long red candle in the direction of the trend
β’ 2nd candle is a Doji gapping away from the candles on each side
β’ There must be no shadows or body overlapping the Doji
β’ 3rd candle is a long green candle
20. Japanese candlesticks are not lagging, they reflect price
action in an easier way to understand. Since they occupy
more space on the chart, the relationship between the
open and the close is clearer to observe than with
barcharts. Candles patterns are often ahead of indicators
to signal market reversals.
Key Points
β’ Candlestick patterns do not give price targets
β’ Can be used in any market and any timeframe
β’ Short bodies indicate indecision while long bodies show
clear opinion
β’ Shadows represent price extremes
β’ Don't analyze candle patterns in isolation, always
consider the prior trend (exception: Kicking pattern)
β’ Confirm with horizontal support/resistance levels or
trendlines
β’ For a signal, wait for the close of the candle to reveal
itself
21. β’ Shadows also called wicks represent the high and the
low of the candle or price extremes
β’ To the Japanese the action comprised between the
open and the close is the most essential
β’ The real body is the price action between the open
and the close
β’ The shadow on the top is called the hair and on the
bottom the tail
β’ A candle without shadows is called a Shaved candle
(Marubozu)
28. Bullis Bearis
Name Grouping Usage Notice
h h
Pin Bar
Engulfing
Piercing
Pattern / Pin bar
Dark Cloud
Cover
Morning
Star /
Evening
Star
Mother If β₯ 150
bar pips may be
Inside Bar should be βover stop
Break out
Setup β€ 150 lossβ
pips
False break
Fakey Setup
[mostly composite
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30. Take Profit and Stop loss
Take Profit Stop loss
Point
1. Open 2 order Place at more
by 1st order place than lower about
TP at 1R and 2nd 5-10 pips
order use trailing
stop at 1R too.
1. 1R take profit
Editor's Notes
A Japanese candlestick is made of three things :the upper shadow which represents the high of the candle, then you have the real body which is the difference between the open and the close and finally the lower shadow representing the low of the candle
