How to Read Candlestick Charts

Dark cloud cover candles should have bodies that close below the mid-point of the prior candlestick body. This is what distinguishes from a doji, shooting star or hanging man bearish reversal pattern. The prior candle, dark cloud candle and the following confirmation candle compose the three-candle pattern.

What is the two candle theory?

A matching low is a two-candle bullish reversal pattern that appears on candlestick charts. It occurs after a downtrend and, in theory, signals a potential end to the selling via two long down (black or red) candlesticks with matching closes. It is confirmed by a price move higher following the pattern.

While this strategy might temporarily work in a bullish market environment, it most likely won’t in the long run. His team is also behind the Axi VIP portal, dedicated to continuing to guide and educate traders. A graveyard doji candle can also be viewed as a reversal pattern if found following a rally. The graveyard doji-pattern looks like an upside-down “T” as the open, and the close is the session’s low.

Bullish Shooting Star

Commodity and historical index data provided by Pinnacle Data Corporation. The information provided by, Inc. is not investment advice. They are the first thing people think of when they imagine traders, alongside line charts and red/green numbers How to Read Candlestick Charts on a big screen. Dates are not accepted directly for this graphic’s data and category labels. This chart offers more versatility as you may use it to depict days, hours, weeks, etc. The chart can be customized by changing its appearance and its properties.

The hanging man looks the same as the hammer, but it appears during bullish trends and suggests that a correction to the downside might soon materialize. After five hours of trading in the range, the bullish momentum breaks through the upper border of the falling wedge. In an ideal situation, there should be three candles; but in practice, there could be two or four candlesticks. Fill out the form to get started and you’ll have your own stock trading account within minutes. The Japanese Candlestick method of visualizing charts is one of, if not the, most popular methods of looking at charts for the modern trader.

What is candlestick trading?

In this scenario, you might consider selling the currency pair and placing a stop loss above the graveyard goji high. The dragonfly doji is usually found at the bottom of bearish trends. This pattern is a two-candle reversal and is the opposite of the bearish engulfing candle pattern. The low price is found at the bottom of the shadow (or wick) below the body.

  • They are the first thing people think of when they imagine traders, alongside line charts and red/green numbers on a big screen.
  • Customers should consider the appropriateness
    of the information having regard to their personal circumstances before making any investment decisions.
  • The three white soldiers also close above the previous candle’s high.
  • A bearish harami cross more accurately predicts the top of an uptrend than a bullish harami cross signal the bottom of a downtrend.
  • The genuine body of an inverted hammer candle is tiny, with a prolonged top wick and little or no bottom wick.
  • The choices are based on recurring patterns that assist in predicting the short-term movement of the price.
  • To the left you’ll see some various Japanese candle formations used to determine price direction and momentum, including the Doji, Hammer, Spinning Top, and Marubozu.

The difference between them is in the information conveyed by the box in between the max and min values. Timeframes from 5 minutes to 1 hour are best for day trading in your retail investor accounts. Differently put, there is a bear trap; the stop losses are triggered and the uptrend gains momentum. It indicates that the selling pressure from the first day may have subsided and that a bull market may be approaching. Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request. Not investment advice, or a recommendation of any security, strategy, or account type.

What Is A Candlestick Chart?

For instance, you cannot use them to learn why the open and close are similar or different. A price action analysis is useful as it can give traders an insight into trends and reversals. During bearish periods, the morning star pattern appears and typically suggests an upside reversal. This pattern begins with a bearish candle and then moves down to a little bearish or bullish candle. These two types of candlestick patterns are triple candle patterns.

Hammers can be both red and green, but the latter represents even stronger buying pressure. A candle chart, a bar chart, or a line chart can all display the price chart. Set the plotPriceAs property to a candlestick, bar, or line to show the price chart as needed.