Candlestick patterns help traders figure out if prices might go up or down. Two important ones to know are the Hammer and Bullish Engulfing Candles. These two are called confirmation candles because they help confirm if the market will change direction.
The Hammer Candle 🛠️
The Hammer is a single candle that shows the price might stop going down and start going up. It looks like:
- Shape: A small top (body) with a long stick below (wick).
- Meaning: Sellers pushed the price down, but buyers brought it back up again.
- When It Happens: Usually at the end of a falling price trend.
What It Means:
The Hammer tells you that buyers are getting stronger, and the price could rise soon. Wait for the next candles to confirm this.
The Bullish Engulfing Candle 📈
The Bullish Engulfing pattern has two candles.
- Shape: The first candle is small and going down, the second is bigger and going up.
- Meaning: The big second candle shows buyers are taking over.
- When It Happens: During a downtrend when prices are falling.
What It Means:
This pattern tells you that buyers are in control, and prices might keep going up.
Main Differences 🕯️
- Hammer: A single candle found at the bottom of a downtrend, indicating buyers gaining control.
- Bullish Engulfing: A two-candle pattern occurring during a price drop, signaling buyers have taken control.
Tips for Beginners
- Look for Confirmation: Always check the next candles to be sure the trend is changing.
- Combine Tools: Use other indicators like RSI (Relative Strength Index) to double-check signals.
- Protect Your Money: Use stop-loss orders to limit risks.
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