Understand the shape – Recognize the signal – Be confident in the command
1. Hammer Candle
• Identification: Long lower shadow, small candle body located above. Short or absent upper shadow.
• Meaning: Usually appears at the end of a downtrend, signaling the possibility that the market will reverse and increase again.
2. Inverted Hammer
• Identification: Long upper shadow, small body below; short or absent lower shadow.
• Meaning: Shows that buying force is starting to appear, possibly a bullish signal but needs to wait for confirmation from the next candle.
3. Bullish Engulfing Candle
• Identification: A large green candle “swallows” the red candle just before it.
• Meaning: Strong signal shows that buyers are dominant, an uptrend may begin.
4. Bearish Engulfing Candle
• Identification: The large red candle completely covers the previous green candle.
• Meaning: Warning that a downtrend is forming when the sellers dominate.
5. Morning Star Candlestick
• Identification: Consists of 3 candles – first is a long red candle, next is a small candle (usually a doji or spinning top), and finally a strong green candle.
• Meaning: A clear bullish reversal pattern, indicating a shift from the selling side to the buying side.
6. Evening Star Candlestick
• Identification: It is the reverse version of Morning Star – long green candle, followed by small candle, then long red candle.
• Meaning: A bearish reversal sign, warning that selling pressure is increasing.
7. Doji Candle
• Identification: Open and close prices are almost equal; upper and lower shadows can be long or short.
• Meaning: The market is hesitant, which can be a time to prepare for a reversal or a trend continuation, depending on the context.
Understanding the 7 basic candlestick patterns not only helps you avoid “peak chasing” but is also the first step to becoming a rational trader, not an emotional gambler in the turbulent crypto market.
Mastering the 7 basic candlestick patterns is like knowing how to "read the chart" - no more confusion when placing orders, but more confidence every time the market is uncertain!
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