If it weren’t for Japanese rice traders, we might not have seen the candlestick patterns in existence. Candlestick pattern history goes back to the 1600s when Japanese rice traders aggressively used these patterns to determine the prices. Candlestick chart patterns are a technical tool that is available in multiple time frames depicting different outcomes.
In today’s blog, we will walk you through popular patterns that are widely used by the trading community to get you started in this trading world. Each to their own – go for the pattern that works best for you.
What is a Candlestick Strategy?
A candlestick strategy or pattern gives price information at multiple times frames and has four main elements in it – OHLC i.e., open, high, low, and close. It could be in the shape of a candle or a simple line.
Each candle has a story to tell and traders direct their moves on a daily, monthly, or even yearly basis. Traders use these patterns to plan their daily, swing, or long-term trades.
Traders generally use other technical indicators and candlestick patterns to generate robust trading signals. A general structure of a candlestick pattern includes two lines above or below the body which depicts the high and low of the day.
The color green or white indicates a positive price momentum and red or black indicates a negative price momentum.
Candlestick Trading Strategies
Now that the basics are clear, let’s move on to two of the major candlestick trading strategies and how to implement them.
Bullish Candlestick Strategies
This candlestick strategy or pattern indicates the change of a downtrend and is generally formed at the bottom of the downtrend. Popular bullish candlestick patterns are:
- Hammer
- Bullish engulfing
- Three white soldiers
- Morning star
- Piercing pattern
- Bullish harami pattern
Traders wait for the confirmation in multiple time frames and allow the candle to form and fully indicate the direction. Once the conviction is built trades are placed accordingly to take the leverage of the trend.
Bearish Candlestick Strategies
Bearish patterns are the inverse of bullish patterns and are generally formed at the top of the uptrend. Traders search for the reversal in the prices of the securities that are experiencing positive momentum and are likely to change in the near future.
Popular patterns are:
- Hanging man
- Bearish engulfing
- Three black crows
- Shooting star
- Evening star
- Bearish harami pattern
These are the most widely used candlestick strategies to express bearish views.
Do You Need to Take up a Technical Analysis Course?
Sometimes you might get overwhelmed searching your trading edge and going for the right candlestick patterns out of many available. Online technical analysis courses can serve as a good guide to filtering the noise and increasing the efficacy of your trades.
Upsurge.club has an insightfully crafted course on candlestick patterns which can help you from the basics. This candlestick course is taught by market veterans with years of experience which can give your learning a different curve and help you find your trading edge.
Conclusion
The easiest thing is to start trading with little capital, but the hardest thing is to survive in the long run.
The majority of the traders lose their capital or edge after some trades and make losses. Candlesticks trading strategies can serve as a good indicator of price and it’s better to complement them with other indicators.
