They are chart patterns that signal a trader about a change in an existing trend. Patterns can be simple as trendlines and can get even complex, like double head and shoulder formations. Technical Analysts and Chartists globally seek to identify chart patterns to predict the future direction of a particular stock. Candlestick ChartsĬandlestick chart patterns are the distinguishing formations created by the movement in stock prices and are the groundwork of technical analysis. Several continuation and reversal patterns give a strong signal and assist in making successful trades. Moreover, two or more candlesticks create patterns that enable a trader to make decisions on the market’s direction. If the closing price is higher than the open price, then the candle is green or white.Ĭandlesticks charts help in adding visual clarity. If the close price is below the open price, then the candle is red (we have used blue above to match our branding).
The body of a candle represents the distance between open to close, and the upper and lower wicks represent the highs and lows of a candle. These are the most popular type of chart patterns and are very versatile. What are Candlesticks?Ĭandlesticks charts originated in Japan and are referred to as Japanese candlestick charts. In the next section, we will discuss the different types of candlesticks. While line charts help give us an overall movement of the stock, bar charts are more detailed and are suitable for demonstrating or spotting the classical price patterns.
There are various types of charts, from line charts, bar charts, and candlestick charts. Technical charts are a two-dimensional representation of price over time. The image is below, and you can right-click to save it as a pdf. Today, we have a special treat for you, a Candlestick Pattern Cheat Sheet.
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