Types of candlesticks and how to use them
Stock prices in the stock market never move in a straight line, nor can they move. Prices sometimes go up over time So never read. And the history of these fluctuations is engraved on the stock price chart.
Analyzing the historical chart of share prices shows that sometimes these price changes follow certain patterns. And those are the future stock price potential used by traders during technical analysis To predict the movement and make a trade plan accordingly.
Demand-Supply Zones, Support-Resistance Lines in Share Trading, Along with trend lines, volume, various indicators, etc., some special chart-patterns are also very effective.
And in this article we will discuss some such classical chart patterns.
Basic Concepts of Candlestick Chart Patterns
Why are chart patterns created?
Share price is the most important thing in the stock market, above all. And this price depends on the buyer of the shares When and at what price the seller agrees to buy and sell. In other words, demand and supply Determines how much the share price will be or in which direction it will go.
As in the normal market, when the demand for shares exceeds the supply, buyers bid higher and higher Agreed to buy it. As a result, the prices continue to rise. And, if it is the opposite, it means from demand If supply is high, sellers want to sell their holdings at whatever price they get. resulting price falls again This cycle of price fluctuations goes on and on. And this is the universal truth of the stock market.
Sometimes buyers and sellers collectively in special situations and at special price levels of shares One shows a unique response that specifically affects supply-demand. Historical share prices When candlesticks or any other type of chart is plotted on a chart, traders can see Those reactions emerge in the form of special patterns on the chart.
And not once or twice, or in one or two places, it is seen that they are repeated again and again in different places. And Repetition occurs when a previously occurring pattern appears to re-form in the live market during trading It provides a foreshadowing of what might happen next. Chart patterns are behind pattern trading That is the underlying meaning.
Chart Pattern Types
In which direction the price will go after the pattern is formed, given the conditions before it was formed Based on that they can be divided into two categories. Namely:
Continuation Chart Pattern
Reversal Chart Pattern
In both cases, generally the longer the period of time they are produced and the larger the range of price changes between them, the The bigger the movement after the breakout.
It is not clear whether the trend will persist or reverse in the middle of the pattern formation. Hence the main trend And to keep a close eye on the trendlines of the pattern along with breakouts You have to watch out for what is going to happen. Another important point is the possibility of trend reversals Unless there is a signal or reason, the trend usually continues in the same direction.$BTC
