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1. Bullish Engulfing
What It Is:
A bullish engulfing pattern forms at the end of a downtrend. A small red candle is followed by a large green candle that completely engulfs it. It signals buying pressure and potential reversal.
Trader Strategy:
Enter long above the high of the engulfing candle.
How:
You wait for the price to move slightly above the highest point (the "high") of the bullish engulfing candle, and then you buy (go long) when that happens. This helps confirm that upward momentum is continuing before you enter the trade.

Why it's done:
It reduces the chance of entering too early in a potential fake out or false signal.
It confirms that buyers are still in control after the bullish reversal pattern.
Example:
If a bullish engulfing candle has a high of $60,000, you might set your entry at $60,100. Only if the next candle reaches or exceeds $60,100 will your trade be activated.
Stop-loss: Below the low of the engulfing candle.
Confirmation: Volume increase or RSI crossing above 50.
Recent BTC Example:
In March 2025, $BTC showed a bullish engulfing pattern on the daily chart around $61,000 after weeks of selling pressure. It marked the beginning of a reversal that led BTC to rebound above $70,000 within two weeks.
2. Bearish Engulfing
What It Is:
A bearish engulfing pattern shows up at the top of an uptrend. A small green candle is followed by a larger red candle that fully covers the previous body, indicating selling pressure and potential reversal.
Trader Strategy:
Enter short below the low of the engulfing candle.
How:
You wait for the price to drop slightly below the lowest point (the "low") of the bearish engulfing candle, and then you open a short position when that happens. This confirms bearish momentum before committing to the trade.

Why it matters:
It helps avoid premature entries in case the price bounces back up.
It ensures that sellers are still in control after the bearish reversal signal.
Example:
If the bearish engulfing candle has a low of $64,000, you might place your short entry at $63,900. Your position activates only if the price breaks that level, confirming the downtrend.
Stop-loss: Above the high of the engulfing candle.
Confirmation: RSI falling below 50 or decreasing volume on prior bullish candles.
Recent BTC Example:
On October 21, 2024, BTC printed a bearish engulfing at the $70K resistance. The pattern led to a selloff, and BTC drop.
3. Hammer
What It Is:
A hammer appears after a downtrend. It has a small body and a long lower wick, signaling that buyers rejected lower prices and may reverse the trend upward.
Trader Strategy:
Enter long above the high of the hammer candle.
Stop-loss: Below the low of the hammer.
Confirmation: Bullish follow-through or rising volume next day.
Recent BTC Example:
In early March 2025, BTC printed a weekly hammer around $59K after a sustained drop. The market responded with a multi-week rally back toward $69K.
4. Shooting Star
What It Is:
Forms after an uptrend; features a small real body and long upper wick. It signals rejection of higher prices and a potential downward reversal.
Trader Strategy:
Enter short below the low of the shooting star.
Stop-loss: Above the high of the candle.
Confirmation: Bearish follow-up candle or weakening momentum indicators.
Recent BTC Example:
On December 18, 2024, BTC posted a shooting star near the $108K all-time high. The pattern preceded a correction that saw prices fall to the $94K range by month-end.
Pro Tip:
While candlestick patterns offer insight into market psychology, use them with confirmation tools (volume, RSI, trendlines) and consider broader market context before acting.
Stay in touch:
In our next Article we would discuss about Relative Strength Index(RSI).

RSI (Relative Strength Index) is a momentum oscillator used in technical analysis to measure the speed and change of price movements. It helps traders identify overbought or oversold conditions in a market.
Key Points:
Scale: RSI values range from 0 to 100.
Overbought: RSI > 70 (price may be too high and could fall).
Oversold: RSI < 30 (price may be too low and could rise).
Default period: 14 (typically 14 days for daily charts).
How to Calculate RSI
Formula:
RSI = 100 - [ 100/(1 + RS)]
How to use it:
Buy signal: RSI crosses above 30 from below.
Sell signal: RSI crosses below 70 from above.
Divergence: When RSI moves opposite to price, it may indicate a potential reversal.
Step-by-Step RSI Calculation in Excel (14-period RSI)
1. Get Your Price Data
Start with a list of closing prices. Let's assume you have 15+ days of data in Column B (B2:B16).
2. Calculate Price Change
In Column C, calculate the change:
C3 = B3 - B2
Drag down to fill.
3. Separate Gains and Losses
In Column D (Gains) and E (Losses):
Gain (D3): =IF(C3>0,C3,0)
Loss (E3): =IF(C3<0,ABS(C3),0)
4. Calculate Average Gain and Average Loss
In row 16 (or after 14 values):
Average Gain (F16): =AVERAGE(D3:D16)
Average Loss (G16): =AVERAGE(E3:E16)
5. Calculate RS (Relative Strength)
In H16:
= F16 / G16
6. Calculate RSI
In I16:
= 100 - (100 / (1 + H16))
7. Smooth RSI for subsequent rows
From I17 onward, use:
AvgGain = ((PreviousAvgGain * 13) + CurrentGain) / 14  
AvgLoss = ((PreviousAvgLoss * 13) + CurrentLoss) / 14
Note: You can use this to keep the RSI "smoothed" for each day after the initial 14.
Create an RSI Chart:
Select your RSI values (Column I).
Insert a Line Chart in Excel.
Add horizontal lines at 70 and 30 to show overbought/oversold levels.

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