Understanding Four Important Candles in Trading

Candles in trading tell us a lot about the stock market. They show how prices move over time. Here are four important types of candles that traders look at when they make decisions:

1. The Doji Candle

What It Looks Like:

A Doji candle looks like a plus sign (+). It has a small body with long wicks on both ends.

What It Means:

This candle means that the opening and closing prices are almost the same. It shows indecision in the market. Neither buyers nor sellers have control.

2.The Hammer Candle:

What It Looks Like:

A Hammer candle has a small body at the top with a long wick below. It looks like a hammer.

What It Means:

This candle shows that even though prices dropped during the day, they bounced back up. It often appears at the bottom of a downtrend and can signal a reversal, where the prices may start to go up.

3.The Shooting Star Candle:

What It Looks Like:

A Shooting Star candle has a small body at the bottom with a long wick above. It looks like a falling star.

What It Means:

This candle shows that even though prices went up during the day, they fell back down. It often appears at the top of an uptrend and can signal a reversal, where the prices may start to go down.

4.The Bullish Engulfing Candle:

What It Looks Like:

This pattern has two candles. The first one is small and red (showing a price drop), and the second one is big and green (showing a price rise) that completely covers the first one.

What It Means:

This pattern shows a strong change in market sentiment. It suggests that buyers are taking control, and prices may continue to rise.

Candles are like a language that traders use to understand what might happen next in the market. By looking at these candles, traders can guess whether prices will go up or down. It's important to remember that no single candle tells the whole story. Traders often look at other factors and use candles as one of many tools to make better decisions.