📈 What Are Candlestick Patterns? – A Beginner's Guide
Candlestick patterns are a popular tool used in technical analysis to understand price movements in the stock, forex, or crypto markets. They help traders figure out whether the market is likely to go up (bullish) or down (bearish).
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🕯 Structure of a Candlestick
Each candlestick shows four key price points for a specific period:
Open: The price when the candle starts
Close: The price when the candle ends
High: The highest price during that period
Low: The lowest price during that period
If the close is higher than the open, the candle is usually green or white (bullish).
If the close is lower than the open, it's red or black (bearish).
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🔍 Common Candlestick Patterns
1. Doji
Open and close prices are nearly the same.
Shows market indecision — a possible reversal may happen.
2. Hammer & Inverted Hammer
Small body with a long lower wick (hammer) or long upper wick (inverted hammer).
Often seen after a downtrend and signals a bullish reversal.
3. Shooting Star
Small body with a long upper wick.
Appears after an uptrend and suggests a bearish reversal.
4. Engulfing Pattern
Bullish Engulfing: A small red candle followed by a large green candle that fully covers it — bullish signal.
Bearish Engulfing: A small green candle followed by a large red candle — bearish signal.
5. Morning Star & Evening Star
Three-candle patterns.
Morning Star signals a bullish reversal.
Evening Star signals a bearish reversal.
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🧠 Are Candlestick Patterns Reliable?
Candlestick patterns are not 100% accurate on their own. They work best when combined with:
Support and resistance zones
Volume analysis
Indicators like RSI, MACD, or moving averages
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Candlestick reading is more of an art than a science. With practice, you’ll get better at spotting patterns and using them in real-world trading.