If by any chance you are a fan of trading with a naked chart and don’t like all the messy indicators, you should definitely go for the candlesticks. This article will discuss the unique analysis instrument named the Candlestick analysis. It also highlights some of the patterns that often appear in candlestick charts.
The Japanese Candlestick is nothing but a visual presentation of the market. It had been invented by a rice trader in Japan named Munehisa Himma in the 18th century. It differs from the other forms of charts like bars and lines. One of the prime aspects of candlesticks that make it stand alone is its ability to depict the market condition with pitch perfect details.
Basically, candlesticks are a type of bar with two extra wick-like extended parts on both ends of a bar. The name candlestick has emerged because of having these two wicks. They give the bars an appearance that corresponds to that of a candle.
Candles in a candlestick chart will be of at least two colors. Either they will consist of red and green or black and white colors. A green or a white bar will represent a bullish trend, whereas a red or a black will represent a bearish trend. All of them will show the rate at which a trade has been placed, the rate at which it gets closed, the lowest and the highest points reached by the price. It should be noted that the bearish bars will move downward, and the bullish ones will move upward. The opening and closing positions switch for each of them.
Candlesticks provide traders with all the crucial data about the price movement in terms of time and condition. With this enriched and detailed analysis system, finding and confirming a worthy signal is easier.
This Japanese chart is so comprehensive that a trader can trade just using it only. He doesn’t have to combine it with any other analysis systems to get a clearer view of the market. However, if anyone puts extra effort and combine it with some additional indicators, the indications will be the most evident and powerful.
All the patterns that appear in a candlestick chart can be of two types: reversal patterns and continuation patterns. Here we will discuss a couple of the most typical patterns in the context of double candlestick-patterns. Most of the elite Singaporean traders in the ETF trading industry rely on the double or the triple candlestick pattern. It allows them to open trades with more confidence and increase their chance of making profit.
The uptrend engulfing is a type of double bar formation where a bigger bullish bar shows up after a bearish bar. Likewise, a downward engulfing happens when after a bullish bar and we see a bigger bearish bar.
These two engulfing patterns signal trend reversal. For both of them, the second candle engulfs the main body of the first one. The bullish engulf signals a bearish trend’s reversal and vice versa.
A tweezer top consists of an upward candle, which is followed by a bearish bar. Here both bars will have a similar small-sized body, and there will not be any lower wick. Both of them will share approximately similar parameters.
Similarly, tweezer bottoms are made of a bearish candle, which gets followed by a bullish bar. None of the candles will have an upper wick, while both of them will have similar short bodies.
Like the engulfing, tweezers will also signal a reversal. A bullish trend’s reversal will be depicted with tweezer tops, whereas a bullish trend’s reversal will be signaled by tweezers bottoms.
If you feel enthusiastic about learning more about candlesticks, you should not just stop here. There are more ways than you think to explore the possibilities of candlesticks.
