Common Candlestick Patterns
a) Doji: The Doji is a simple, yet significant, candlestick pattern. It forms when the opening and closing prices are nearly equal, resulting in a cross-like appearance. The Doji indicates market indecision and suggests a potential trend reversal.
b) Hammer and Hanging Man: The Hammer and Hanging Man patterns both have small bodies and long lower wicks. The Hammer appears after a downtrend and signals a potential bullish reversal, while the Hanging Man appears after an uptrend and warns of a possible bearish reversal.
c) Bullish Engulfing and Bearish Engulfing: The Engulfing patterns involve two candles, where the body of the second candle engulfs the body of the first. The Bullish Engulfing occurs in a downtrend, indicating a likely bullish reversal. The Bearish Engulfing, on the other hand, appears in an uptrend and suggests a bearish reversal might be imminent.
d) Morning Star and Evening Star: The Morning Star is a three-candle pattern, starting with a bearish candle, followed by a Doji or spinning top, and concluding with a bullish candle. It signifies a shift from bearish to bullish sentiment. The Evening Star follows a similar structure but indicates a shift from bullish to bearish sentiment.
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