What are those weird candles on your screen?

I bet the first time you saw the candles on your screen you wondered how anyone could trade this, don’t worry I had it exactly the same way. So let’s take a look at the candles.

Parts of the candle

let’s take a look at the specific parts of the candle. On the candle we can see the highest high which means at what price the candle was trading at the peak. The same goes for the highest low, except that we can see at what lowest price the candle was trading. Next part is the body which contains information at what price the candle opened and then at what price it closed. I would also like to add that those long thin lines are called wicks as you can see in the picture. This may seem very complicated, but once you have observed the candles for a while. you’ll find that there’s nothing difficult about it.

You can see that I have used an example of two candles here and not just one because on the chart we can often see a green candle (bullish), the price of this candle closed above the price at which it opened. On the other hand, the red candle (bearish) started higher and eventually closed below the opening price.

The famous candlestick patterns

I’ll show you some familiar candlestick patterns. In my opinion, these patterns should not be used on a clear chart, I would always put them in some sort of market context.

The idea of seeing a pattern and immediately going to try to trade it is very tempting, but I would like you to observe how these patterns behave in the market and then try to trade them, nowhere is it written that these patterns have a 100% success rate and guarantee you a certain profit.

Of course do as you think, I would just like to say from my own experience that nothing is as simple as it looks, and the practice is the key, anyway I believe that these patters are often traded and many traders are profitable when using them.

At these patters, the market is expected to move upwards. Most of the traders will go for long trades and will try to catch the trend upwards.

Hammer

The hammer candlestick can be seen as a candle with a long wick and a tiny body on top of the candle. The name itself suggests that the candle is shaped like a hammer.

hammer candlestick appearing on the chart

I could draw the individual patterns for you, but I’d rather show them live on the chart.

the hammer candlestick usually occurs at important levels on the chart and changes the direction the market will move

In this case it is a bullish pattern and we can see the market changing its direction upwards.

I would just like to remind you again that patterns don’t always work out and we have to count on losses, the market is unpredictable and no one can read it successfully in every case.

Three White Soldiers

The three white soldiers pattern is strongly bullish, we can recognize it by the three green candles with each of them closing its high above the previous candle.

With these candles it is good to look at the length of their bodies the bigger the body and the smaller the wick, the better the bullish indicator.

Bullish Engulfing

The bullish engulfing pattern can be seen at key levels just like the hammer patter and will turn the market upwards.

The idea is that the bullish candle will engulf the entire body of the previous candle and make it clear that the buyers have won this time.

Bearish candlestick patterns

At these patters, the market is expected to move downwards. Most of the traders will go for short trades and will try to catch the trend downwards.

Hanging Man

Bearish reversal pattern, equivalent of a hammer. This candle again has a short body at the top and a long wick. It usually occurs at the top of a particular swing and marks a downward reversal.

Three Black Crows

Three black crows is equivalent to three white soldiers. Three consecutive red (bearish) candles with each one closing lower than the previous one. This pattern starts a downtrend.

as with a bullish pattern the larger the bodies of each candle are the more emphasis on the downtrend there is.

Bearish Engulfing

A bearish engulfing pattern as you may have already understood is the equivalent of a bullish engulfing pattern.

this pattern is characterized by a red candle (bearish) engulfing the body of the previous green candle (bullish). The bears take control of the market and the market moves downwards.

Please be careful

as I have mentioned here several times, the market is unpredictable and trading takes a lot of experience, so be aware that even if you use these patterns the success rate is not 100%. I recommend to try things out first and when using these patterns put them in a specific market context. also use technical analysis or other tools of your choice.

Be careful in the markets and have a good day.

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