Candlestick Patterns for Beginners

Candlestick charts are a popular way to visualize price action in stocks, forex, and cryptocurrencies. Originating in Japan, these charts help traders spot potential market reversals and continuations at a glance.

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📊 What Is a Candlestick?

Each candlestick shows four key prices for a given time period (e.g., 1 minute, 1 hour, 1 day):

Open: Price at the start of the period

Close: Price at the end of the period

High: Highest price reached

Low: Lowest price reached

If the close is higher than the open, the candle is usually colored green (or white), indicating bullish (upward) momentum.

If the close is lower than the open, it’s colored red (or black), indicating bearish (downward) momentum.

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🔍 Five Basic Candlestick Patterns

1. Doji

Shape: Very small body (open ≈ close), long or short wicks.

Signal: Market indecision; possible reversal when appearing after a clear trend.

2. Hammer

Shape: Small body at the top, long lower wick (tail).

Occurs: After a downtrend.

Signal: Bullish reversal—buyers pushed price back up.

3. Shooting Star

Shape: Small body at the bottom, long upper wick.

Occurs: After an uptrend.

Signal: Bearish reversal—sellers pushed the price back down.

4. Bullish Engulfing

Shape: Two-candle pattern: a small bearish (red) candle followed by a larger bullish (green) candle that completely “engulfs” it.

Signal: Strong bullish reversal.

5. Bearish Engulfing

Shape: Two-candle pattern: a small bullish (green) candle followed by a larger bearish (red) candle that engulfs it.

Signal: Strong bearish reversal.

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🎯 Using Candlesticks Wisely

Don’t trade on patterns alone. Always confirm with other tools:

Volume: Increased volume gives patterns more weight.

Support & Resistance: Check if patterns form near key price levels.

Indicators: RSI, MACD, moving averages, etc.

Practice on demo charts before risking real capital.

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