Candlestick Pattern and its different types

CANDLESTICK AND THEIR
DIFFERENT TYPES
---Written by---
Mr. Yogesh Bhope

What is Candlestick?
 A Candlestick is a type of chart used in trading as
a visual representation of past and current price
action in specified timeframes.
 A candlestick consists of the body with an upper
or lower wick or shadow.
 Candlesticks are created using the opening and
closing prices along with the trading range of the
candlestick period

Bearish and Bullish Candlestick

Candlestick Basics
Bearish Candle

Candlestick Basics
Bullish Candle

Candles and their Importance
Hammer & Inverted Hammer
Hammer : A black or a white candlestick that consists of a
small body near the high with a little or no upper shadow and
a long lower tail. Considered a bullish pattern during a
downtrend.
Inverted Hammer : A black or a white candlestick in
an upside-down hammer position.

Hammer And Inverted Hammer
Appearance On The Chart
 The hammer is the name used for a single candlestick chart pattern that is a bullish
reversal signal. Its name comes from the fact that it visually looks like a hammer. As
the short body of the candle is on top of a long wick (shadow). Many traders believe
for it to be valid the lower wick that creates the handle must be at least twice the
size of the upper body. The body must be on the top of the wick with a flat top and
very little but preferably no upper wick.
 Hammers have a higher probability of being a valid reversal signal when found inside
a down-trending chart. The lower wick shows an intraday sell off then reversal to
close near the highs of the day showing a rejection of selling at lower prices and
buyers taking control of the price eventually during the day. With the opening and
closing prices being near each other it can show that the intraday volatility to the
downside was rejected and the possible end of lower lows in the downtrend.

 After a single hammer candle forms during a downtrend the next day’s candle
should open inside the hammer price range or higher to confirm that the
reversal did take place. Waiting for one more candle to open or close higher
after the hammer formation increases the odds that an entry will be
successful.
 A longer lower wick can help confirm the price bounce is valid due to the
magnitude of the reversal off the lows. Increased volume can also help
validate a hammer reversal signal. Hammer candlesticks are best used in
correlation with other technical signals like a key previous price support area,
and technical oversold bounce, or a moving average for a confluence of
indicators to buy.
 An inverted hammer candlestick pattern is an inverse signal with the long
wick on top and the body at the lows in price for the day and looks like an
upside down hammer. An inverted hammer can show the probability of a top
being in if made during and uptrend showing a rejection of higher prices with
a close near the lows of the day.

Hammer And Inverted Hammer

Marubozu Candlestick
 The marubozu is a Japanese candlestick pattern used as a technical indicator of
extreme price action inside a specific time period. The marubozu shows visually
that an asset has been bought or sold with momentum in one direction with a
candle and closed at either its high price or low price of the trading period.
 A marubozu consists only of the candle body, there are no upper or
lower wicks or shadows outside the top or bottom
of the candle.
 A green marubozu candle has a long bullish body and
is created when the open is the low and the close is
the high for the full trading period of the candle. T
he green marubozu candlestick pattern shows that
buyers were in control of the price of the asset from the opening trade to the
closing trade. This is one of the most bullish individual candles in technical
analysis and there is a high probability that the next candle on the chart
will be bullish.

 A red marubozu candle has a long bearish body and is created when the open
is the high and the close is the low for the full trading period of the candle. A
red marubozu candlestick pattern shows that sellers were in control of the
price of the asset from the opening trade to the closing trade. This is one of
the most bearish individual candles in technical analysis and there is a high
probability that the next candle on the chart will be bearish.
 The marubozu candlestick has a higher probability of success when it happens
in confluence with other key technical signals like moving averages, support,
resistance, or overbought/oversold readings

Doji Candlestick
Doji Long
Legged
Doji
Dragonfly
Doji
Gravestone
Doji
 The doji candlestick is a chart pattern in technical analysis that is usually
formed from a small trading range in a time period where both the open and
closing price are nearly equal. A Doji candlestick usually signals indecision for
a direction in a market. A Doji is not very significant inside a range bound
market that is not clearly trending in one direction as the market is already
indecisive.

 A Doji that forms after a long term trend in one direction has more meaning
as a potential signal for a reversal or end of a current trend. A doji shows the
beginning of a loss of momentum in the current market direction as
equilibrium is reached for buyers and sellers at the same price point by the
end of trading that time period
 So, basically Doji is confusing candle where buyer and seller are confused to
go long or short.
 Mainly it forms Base (RBR/RBD/DBR/DBD).

Doji Candlestick

Spinning Top Candle
 A spinning top is a single candlestick pattern that has a body in the middle of
two longer wicks. A spinning top chart pattern is a signal that neither buyers
or sellers have control of price action in the time frame of the candle.
 The spinning top candle shows that price ended up closer to
the open or the close at the end of the time frame than to the
extremes of the trading range, this shows the chart is indecisive
for the current trend. The range of the candles long wicks shows
volatility and how at different points in the time frame of the
candle both buyers and sellers had control but both failed to
follow through and create a swing or trend in price.
 A spinning top candle is primarily used in technical analysis as a signal that a
trend is ending. If the spinning top candle forms after a trend or swing in a
market’s price action it can signal a high probability of a reversal. It is
an indecision candle with expanded volatility showing that the current
direction of the move on the chart is losing momentum.

Spinning Top Candlestick

Bullish & Bearish Engulfing Candlestick
 An engulfing bullish pattern is created when a bearish red body candle happens
on a chart and then the following candle has a large bullish green candlestick
body that has both a higher high and a lower low
 An engulfing Bearish pattern forms when a full red body candle covers a small
green candle from highs and lows.

Bullish & Bearish Harami Candlestick Pattern
 The Bullish Harami candle pattern is a reversal
pattern appearing at the bottom of a downtrend.
It consists of a bearish candle with a large body,
followed by a bullish candle with a small body
enclosed within the body of the prior candle.
 A Bearish harami is a reversal in a bull price movement. It is generally
indicated by a small decrease in price (signified by a Red candle) It consists
of a Bullish candle with a large body, followed by a bearish candle with a
small body enclosed within the body of the prior candle.

Bullish & Bearish Harami Candlestick Pattern

Some different types of
Candlestick patterns
 Morning Star.
 Evening Star.

Dark cloud cover & Piercing pattern

Candlestick Pattern and its different types

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