Candlestick charts are key tools when it comes to trading, as it allows traders to interpret price information and possible market trends from a few price bars, enabling them to develop inferences about future movements and price patterns of the asset.
Candlestick charts are made up of many candlesticks, where a candlestick is a single bar that represents the price movement of an asset for a time period. Information that candlesticks offers are that of the open, high, low, and closing price for that time period. Candlesticks have the following key features, the body, the wick and shadow, and the colour of the candlestick.
The body of the candlestick represents the range of prices between the open to close.
The wick and tail represent the highest and lowest traded prices, respectively for a certain time period.
The colour represents the direction of the market movement. In general, a green or white body indicates an increase in price, while a red or black body indicates a decrease in price.
Candlestick patterns can consist of one or more candlesticks, where many such patterns can provide insight on the balance between buying and selling pressures in the market, and others can identify continuation patterns or an indecisive market. Knowing these patterns can shed some light on opportunities within a market. The following are the 12 important candlestick patterns that we think every trader must know.
The above 11 Candlestick Patterns are patterns that we feel are the important basic patterns that can enable any trader to make important decisions, whether it is identifying a trend continuation or trend reversal. However, the best conclusions to which patterns may work for you still depend on your observations and testing.