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Candlestick patterns-Beginner Guide

Stock market trading in India

Very Interesting history of this Candlestick. Candlestick patterns was introduced in Japan. In order to keep track of their rice prices at the market Japanese rice traders has used the candlestick patterns. This is used to describe the price movement in the market. This is invented by  Munehisa Homma  a Japanese rice trader. By using this they were able to identify fluctuations in the price. So then this got introduced in US and then become popular. Candlestick patterns-Beginner Guide Article will introduce  which patterns generally we use in market and what are the special mentions of it.

While we comparing with other candlestick pattern is the beginning step when we studying about Technical Analysis.( Read More) Which provides the clarity of price movement in the market.

Once you are familiar with candlestick pattern, no other patterns will attract you more than candlesticks. When you acquire the skill in patterns, you can get accurate results in short and long-run.

First let us understand the basic candlestick formations

Meaning of Bullish and bearish candle

If the closing price of the candle is above the opening price, such candle is known as Bullish Candle.

If the closing price of the candle is below the opening price, such candle is known as Bearish Candle.

Candlestick Patterns

Basically, there are three types of candlestick patterns are there

  1. Bullish Candlestick Pattern
  2. Bearish Candlestick Pattern
  3. Neutral Candlestick Pattern

In this blog mainly we are discussing about Bullish Candlestick pattern.

1.Bullish Candlestick Patterns

It means after the downtrends completes in support or resistance level it forms a bullish signal that indicates the upcoming uptrends in the market. In stock market our studies say that market will go in an uptrend but it is not guaranteed. We only assume it. You can use this chart pattern for scalping, day trading, swing trading, long term trading etc.,

In this blog we are discussing about Bullish Candlestick Pattern. We can use Trading View website to read our chart.

Bullish Candlestick Patterns it includes various types they are

a) Bullish Engulfing

b) Bullish Piercing

c)Hammer

d)Bullish Harami

e) Green or White Marubozu

f) Morning Star

Lets see one by one

a) Bullish Engulfing

This is a trend reversal pattern. It indicates that end of the downtrend and start of the uptrend. If the Bullish Engulfing candle appears on the support line this is the signal that shows market will be going up.

here we are taking 1 day timeframe as larger timeframe provides more clarity.

In this pattern first day small candle happens next day candle will engulf(cover) the full body of the previous days candle. The long bullish candle indicates a strong bullish reversal has occurred.

A positive opening on the third day it gives you the conformation. Then you can go for long position.

Example: In the above chart it shows the Bullish Engulfing. This candle shows that after the downtrend the stock is uptrend. This candle will show the positivity in the stock in upcoming days.

b) Bullish Piercing

This candle indicates that market will fail to make new low and the bulls run will be starting.

Here the Bullish Candle closes exactly 50% or 50% above the bearish candle body is known as Bullish Piercing.

In this pattern on the first day long bearish candle, on the second day candle open is lower than the previous day, on the third day if the candle crosses second days high than you can go for long.

This is the powerful and rare price chart patterns. This is also formed in the support level then it gives you the good results.

c)Hammer

This is a small candle which having long wick with a small body.

When this forms in the low level it takes the uptrend position then it is known as hammer candle.

Here the color of the candle should be either green or red.

d)Bullish Harami

If a Bullish candle closes within the bearish candle body completely is known as bullish harami.

This is also known as inside candle, on the next day if the candle opens high of the previous day candle, then you can go for long entry.

e) Marubozu Green or White

This is a powerful candle, this candle is having a long body with a small wick or no wick.

When Green Marubozu appears in the support line it shows the uptrend or trend reversal.


f) Morning star

Morning Star is a combination of three candles, star is also indicates uncertainty in the market just like doji.

This is also a trend reversal pattern. This candle shown in the downtrend.

First day bearish long candle will be appeared, on second day price gaps below the first day close, on third day price open gap up and close near first day candle.

Conclusion

Candlestick pattern is the beginning step when you start doing technical analysis.

Before any other tool like  moving averages it will provides you the signal of movement in the stock into upwards.

Always , It is not 100% guaranteed that after the bullish candles market is moving upside only ,always there will be exceptions based on result, news etc. So this is just study and behavior of individual candles , by this we can  assume what can happen next in market.

This can be viewed in different timeframes for better clarity. Timeframe can be of 5 minutes,15 minutes,30minutes,1 hour ,1 day,1 year etc. If you use longer timeframe, it can give you the clear picture.

 

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