Candlestick patterns are crucial tools for traders to analyze price movements and predict future market behavior. Below are the top 5 candlestick patterns with full details:
đ„ 1. Doji
The Doji represents indecision in the market, as the open and close prices are almost the same. Itâs a neutral pattern but can signal a reversal when it appears in a trend.
đ Key Features:
- Shape: The body is very small (open and close prices are nearly identical), and it may have long wicks or shadows.
- Interpretation:
- In an uptrend, a Doji suggests that buying momentum is weakening, and a potential reversal to the downside may occur.
- In a downtrend, it signals that selling momentum is weakening, which may lead to an upward reversal.
đ„ Variants:
- Long-legged Doji: Both upper and lower shadows are long, showing significant indecision.
- Dragonfly Doji: Has no upper shadow and a long lower shadow, signaling potential bullish reversal.
- Gravestone Doji: Has no lower shadow and a long upper shadow, signaling potential bearish reversal.
---
đ· 2. Hammer
A bullish reversal pattern that forms at the bottom of a downtrend, the Hammer signals that the market may soon reverse to the upside.
đ„ Key Features:
- Shape: A small body at the top with a long lower wick (at least twice the size of the body).
- Interpretation: It shows that although sellers pushed the price lower during the session, buyers stepped in strongly and drove prices back up, indicating buying pressure.
đ¶ Variants:
- Inverted Hammer: Similar but with the long wick above the body. It signals a possible reversal after a downtrend but needs confirmation with the next candle.
---
đ¶ 3. Engulfing Pattern
An Engulfing pattern involves two candles, where the second one completely engulfs the body of the first. It is a strong signal of reversal.
đ· Key Features:
- Bullish Engulfing: Appears at the bottom of a downtrend. A small bearish candle is followed by a large bullish candle that fully engulfs the previous one.
- Bearish Engulfing: Appears at the top of an uptrend. A small bullish candle is followed by a larger bearish candle that fully engulfs the previous one.
đ„ Interpretation:
- Bullish Engulfing: Indicates a reversal to the upside as buyers take control.
- Bearish Engulfing: Signals a potential reversal to the downside as sellers overpower buyers.
---
đ„ 4. Morning Star / Evening Star
Both of these are three-candle reversal patterns that signal a major change in direction.
đ„ Morning Star (Bullish Reversal):
- Structure:
1. Large bearish candle.
2. Small-bodied candle (can be bullish or bearish), showing indecision.
3. Large bullish candle that closes well into the body of the first bearish candle.
- Interpretation: Signals the end of a downtrend and the beginning of an upward reversal.
đŽEvening Star (Bearish Reversal):
- Structure:
1. Large bullish candle.
2. Small-bodied candle, showing indecision.
3. Large bearish candle that closes well into the body of the first bullish candle.
- Interpretation: Signals the end of an uptrend and the beginning of a downward reversal.
---
đ„5. Shooting Star
The Shooting Star is a bearish reversal pattern that appears at the top of an uptrend.
Key Features:
- Shape: A small body at the bottom with a long upper wick (at least twice the size of the body), resembling an inverted hammer.
- Interpretation: It shows that although buyers pushed the price up during the session, sellers stepped in strongly, driving prices back down. This indicates potential exhaustion of the uptrend and a shift towards a downward movement.
---
Summary:
These patterns help traders gauge market sentiment and the potential direction of price movements. Here's a quick overview of when these patterns are most useful:
- Doji: Signals indecision or potential reversal.
- Hammer: Indicates a bullish reversal.
- Engulfing Pattern: Confirms strong reversals (bullish or bearish).
- Morning/Evening Star: Strong indicators of trend reversals.
- Shooting Star: Signals bearish reversal.
Each of these patterns must be used in conjunction with other indicators or $ETH
p$BTC
a#TrumpFirstBTCUse tterns to increase accuracy.$BNB