There is candlestick pattern for just about every high probability price action. The wise investors and traders use these to their advantage. Here are 10 of the most popular candlestick patterns you should probably get to know.
* Dark Cloud Cover: This is a two-day formation which arises when the candlestick formed on the first day has a long white body followed by an opposite colored candlestick, which opened at a new high only to close below is the midpoint of the previous day's trading. This pattern is considered a bearish reversal signal.
* Doji: You will find doji's where the open close, high and low are in close proximity. The candlestick ends up looking like a small cross. It means that the buyers and sellers are indecisive and can indicate potentially that a reversal is about to take place.
* The engulfing candlestick pattern: This formation consists of just two candlesticks. The first of the two will open and close within the real body of the second candlestick, and as such the second one will have an open and close outside the first candlesticks real body. This can be a bearish or bullish engulfing pattern depending upon the full or empty bodied candlesticks in the pattern.
* Evening Star: Commonly regarded as a bearish reversal pattern, this three-day pattern consists of a long white body, followed by a smaller gap up candlestick, with the third and final day closing below the midpoint of the first day.
* Hammer: When trading occurs significantly below the open, but ends well above the low and closes as its high, the candlestick formed has only one tail below its body. When this formation occurs during a downtrend, it often signals a reversal.
* Hanging Man: Identical to the Hammer, this candlestick pattern occurs during an uptrend, and signals a continuation of the price movement.
* Harami: This is a simple two day candlestick pattern that has a relatively small body on the second day that is completely surpassed on both sides by the previous day's candlestick and is always of the opposite color. It usually occurs during a minor correction in a bear or bull market and signals that this temporary uptrend or downtrend is reaching an end, and the underlying trend will continue. It is especially considered a strong indicator when it appears together with low trading volume.
* Morning star: This is a 3 bar candlestick pattern. Its a bullish reversal pattern and a very high probability one at that. The first candlestick will continue the bearish trend by closing well below the open. Next the second candlestick will gap down and close a bit higher than the open, but not much. Last the third and final candlestick in the pattern will gap up and rally to close well within the body of the first candlestick.
* Piercing Line: This is a two-day formation considered to be a bullish reversal. The first is a continuation of a downtrend with a long black body. The second day opens at a new low, but closes above the midpoint of the previous day's trading.
* Shooting star: This is a single candlestick pattern. It looks like an upside down hammer and signals a bearish reversal. As such it's best when found on a bullish uptrend. Look to the long upper witch for the intuitiveness in this candlestick. The bulls pushed hard like they did in the prevailing trend but the bears won the race by days end closing near the low / open. - 15224
* Dark Cloud Cover: This is a two-day formation which arises when the candlestick formed on the first day has a long white body followed by an opposite colored candlestick, which opened at a new high only to close below is the midpoint of the previous day's trading. This pattern is considered a bearish reversal signal.
* Doji: You will find doji's where the open close, high and low are in close proximity. The candlestick ends up looking like a small cross. It means that the buyers and sellers are indecisive and can indicate potentially that a reversal is about to take place.
* The engulfing candlestick pattern: This formation consists of just two candlesticks. The first of the two will open and close within the real body of the second candlestick, and as such the second one will have an open and close outside the first candlesticks real body. This can be a bearish or bullish engulfing pattern depending upon the full or empty bodied candlesticks in the pattern.
* Evening Star: Commonly regarded as a bearish reversal pattern, this three-day pattern consists of a long white body, followed by a smaller gap up candlestick, with the third and final day closing below the midpoint of the first day.
* Hammer: When trading occurs significantly below the open, but ends well above the low and closes as its high, the candlestick formed has only one tail below its body. When this formation occurs during a downtrend, it often signals a reversal.
* Hanging Man: Identical to the Hammer, this candlestick pattern occurs during an uptrend, and signals a continuation of the price movement.
* Harami: This is a simple two day candlestick pattern that has a relatively small body on the second day that is completely surpassed on both sides by the previous day's candlestick and is always of the opposite color. It usually occurs during a minor correction in a bear or bull market and signals that this temporary uptrend or downtrend is reaching an end, and the underlying trend will continue. It is especially considered a strong indicator when it appears together with low trading volume.
* Morning star: This is a 3 bar candlestick pattern. Its a bullish reversal pattern and a very high probability one at that. The first candlestick will continue the bearish trend by closing well below the open. Next the second candlestick will gap down and close a bit higher than the open, but not much. Last the third and final candlestick in the pattern will gap up and rally to close well within the body of the first candlestick.
* Piercing Line: This is a two-day formation considered to be a bullish reversal. The first is a continuation of a downtrend with a long black body. The second day opens at a new low, but closes above the midpoint of the previous day's trading.
* Shooting star: This is a single candlestick pattern. It looks like an upside down hammer and signals a bearish reversal. As such it's best when found on a bullish uptrend. Look to the long upper witch for the intuitiveness in this candlestick. The bulls pushed hard like they did in the prevailing trend but the bears won the race by days end closing near the low / open. - 15224
About the Author:
Mark Deaton has written a plethora of articles on candlestick patterns and how to use them effectively. For more information and to download his candlestick masters course visit http://www.candlestickgenius.com
