There are a number of candlestick patterns that one can become familiar with. Since there are so many patterns, we can simplify the process by recognizing some common themes in a majority of the patterns. First off, we need to recognize a doji candlestick. This occurs when the opening and closing price are basically the same price. The doji looks like a cross. The cross does not have to be in the middle of the candle. It can be in the upper portion or lower portion of the range of the candle. A doji represents indecision regarding the price. Buyers and sellers tried for control but in the end, it was basically a standoff. A doji that occurs after a bullish or bearish move can signal a potential change.
Another theme with the candlestick patterns is that a change of direction prediction is usually based on the change already occurring. This means that leading up to the change, there are several consecutive bullish or bearish candles. This is followed by a candle or two reversing direction. The reversal is a confirmation of the change.
When you combine a reversal with a preceding doji, the likelihood is higher. Here is a link to a website that lists basic candlesticks as well as bullish and bearish patterns: http://www.candlesticker.com . This is a free site. You will see that a good portion of the patterns involve a doji or the reversal already starting. Focusing on these 2 concepts comprises a good starting point when learning candle patterns.
No comments yet.