How do you use candlestick patterns to identify signals?

Candlestick patterns combine data of multiple time frames into single price bars. For eg a candle for a DAY combines the open, high, low and close for that day while a candle for an HOUR gives the same data for an hour. Each candle tells a story of the fight between the bulls and bears during that hour. A green candle indicates the buyers pushed the prices higher from its OPEN and a red candle indicates that sellers pushed the prices lower from the OPEN. Each candle has a BODY, a LOWER WICK and an UPPER WICK. Candles reflect the CURRENT price and PAST price actions. It must be combined with other technical indicators. Candles can be used for all asset classes having a ready market like shares, gold, forex, commodities.

Candlesticks are one of the visible visual price representations on the chart. It came into popularity when a broker started using and sharing the idea to the world. But the origin of candlesticks can be rooted back to the 18th century of the Japenese Rice farmers. Hence, Japanese candlesticks.

As a technical analysist and full-time trader, I'd emphasize the importance of understanding these patterns' historical context and combining them with other technical and fundamental analysis for more accurate decision-making. Happy trading!

Candlestick patterns are like the intricate choreography of financial markets, a captivating dance between bulls and bears, painted upon the canvas of price charts. The "Doji" resembles a delicate balance, a tug-of-war between equilibrium and volatility. Its open and close are nearly identical, signifying indecision and a potential reversal on the horizon. Conversely, the "Hammer" and "Shooting Star" are tales of resilience and vulnerability. The Hammer's petite body and extended lower shadow suggest a rebound from lows, while the Shooting Star's upper shadow narrates a climb followed by a potential fall. These patterns are not magic spells but tools of interpretation, revealing the ebb and flow of market psychology.

Candle stick pattern @ key level is a strong combo. It has higher probability of success. Identifying and understanding the one that works well and relevant timeframe to trade it is where the work is

The joy of candlestick charts is they can provide a low latency inspiration on whether to trade or not without first having to spend time on oodles of statistics or indicators. Take an interesting signal, appreciate what it really means and what its implications are likely to be then overlay it with your preferred indicators to see if that gives you a sound trading signal to enter or exit the market.

Start by understanding the basic components of a candlestick. Identify Common Candlestick Patterns: There are numerous candlestick patterns, but it's important to focus on some of the most commonly used ones. Use Candlestick Patterns for Entry and Exit Signals: Candlestick patterns can be used to determine entry and exit points in the market. Consider Context: Combine with Other Technical Analysis Tools: Set Stop-Loss and Take-Profit Orders: Practice and Backtest: very important: they are not foolproof indicators and should be used in conjunction with other analysis methods

Candlesticks formation in TA is a great subject of choice to behold as for any trader that is ready to optimize the chart interpretation. The areas of value where candlesticks form really matters alot and has alot to do with the action that follows in market shift in price. There are different types of candlesticks formation pattern that can be recognised as reversal or continuation patterns in the market that aid an informed decision in TA analysis. One of them is Bullish engulfing candlestick formation pattern

Indeed, you've captured a vital aspect of market analysis. Market cycles are the heartbeat of trading, revealing the dynamic interplay of forces that drive price action. As a seasoned candlestick explorer, I wholeheartedly endorse your approach of using candlestick patterns to decipher these stages. Recognizing reversal patterns as markers of potential transitions and continuation patterns as confirmations is a skillful way to anticipate market shifts. Remember, the true art lies in combining candlestick insights with other technical tools to refine your trading edge. Stay vigilant, and may your trades be guided by the illuminating language of candlesticks. Happy trading!

This is quite simple once you understand the market cycle itself, at the end of a momentum and impulsive move, when the seems-to-be-like correctional move reverses and break through the previous High or Low structure, then we can be looking forward to see how candlesticks formation pattern will give us a high probability trade entry as a signal upon its formation. it makes sense with understanding liquidity, volume, momentum, structures etc. At the confirmation of the formation, we will hit the market with proper risk management and set stop loss and take profit on position.

When you profiled the market on different time frames and you see an opportunity on any of the timeframes on higher perspective then it is good to mark your point of interest and transpose the same info to a lower time frame and seek entry in the market. That will help to reduce the risk (stop loss) and maximize the potential profit. So candle bodily closure on higher time frame could break a structure and we go to lower timeframe to wait for confirmation on any action candle formation, upon that, we hit the market.

The success rate depends on the time frame. Higher timeframe charts are more reliable and success rates are also higher. One should follow top bottom strategy where monthly, weekly and daily charts are studied together. Monthly chart tells the trend. Weekly chart tells the momentum. Daily chart tells the entry / exit points. If the charts are to be studied on a single timeframe, then weekly chart is the standard one.

Very important: candelstick patterns need to be associated with additional technical analysis tools. 1----Determine the primary trend over an extended period of time (daily or weekly). candlestick patterns are most dependable when applied to the principal trend. 2. In order to identify prospective entry and exit points, employ shortened time frames. After the identification of the fundamental trend, fewer time frames can be employed. Consider confirmation over an extended period of time. Before entering a trade based on affirmation from a lengthier time frame, one should consider a shorter time frame candlestick pattern. Implementing this measure will aid in mitigating the occurrence of deceptive signals.

The wicks/shadow/tail of the candlesticks can be identified as highs or lows of the candle. And above or below those zones are where the liquidity are residing and the best thing to do is to set your stop loss at a safer price range. In a low probability trade setup those above or below are equally considered as where stop loss should be set. A candlestick like long-legged doji formation is a good way to tell you the market direction is not defined yet and you should sit on your hands for some times more before you see clearly where the market is heading.. Doji's family is generally known for indecision in the market, by that understanding, you won't jump in the market during consolidation phase.

A group of candles with longish wicks in the same direction often portends a change in direction. That being said, volume and especially volatility indicators are key to understanding the near-term extent of the next move.

Few examples Bullish hammer: a reversal pattern that often forms at the bottom of a downtrend. It has a long lower shadow and a short body, and it closes above its open. Traders can use a bullish hammer to identify potential reversal points. Shooting star: a reversal pattern that often forms at the top of an uptrend. It has a long upper shadow and a short body, and it closes below its open. can use a shooting star to identify potential reversal points. Engulfing pattern: a reversal pattern made of two candlesticks. The second candlestick completely engulfs the body of the first candlestick. it forms after a downtrend and signals a potential reversal to an uptrend.

I think candlestick charts are better to understand the human psychology than bar charts. In classical candlestick charting one only needs to understand candlestick price patterns, volume and time. No other indicator is needed to determine the price projection.