Japanese Candlestick Patterns.
· Japanese candlesticks patterns are one of the most important and popular indicators that traders use to enter and exit a stock. They are the foundation to pretty much every trading decision.5/5(5). Even though the session opened and closed with little change, prices moved significantly higher and lower in the meantime. Neither buyers nor sellers could gain the upper hand, and the result was a .
Up to day-two we have a simple Bullish Harami pattern. Haramis give a clear-cut formation reflecting buyers overtaking the strength in the downtrend. This formation often precedes a continued rally in price. With just a Harami pattern, most candlestick analysts will usually wait for additional conformation before entering a long position.
The Inside formation is that confirmation. The first day is in a downtrend with a long black body. The next day opens lower with a Doji that has a small trading range. The last day closes above the midpoint of the first day. The Morning Star is the basic anatomy of a sudden Pump and Dump operation in the market. Kickers Kickers are one of the most explosive and powerful reversal patterns.
Like most candle patterns there is a bullish and bearish version. In the bullish version, the security is moving down and the last red candle closes at the bottom of the range.
Then, on the next day, the stock gaps open above the previous day's high and close. This "shock event" forces short sellers to cover and brings in new traders on the long side.
The opposite takes place in the bearish version. The sellers are in control. On the second day you see a wide range candle that has to close at least halfway into the prior candle.
Those that shorted the security on first day are now sitting at a loss on the rally that happens on the second day. This can set up a powerful reversal. Belt Hold A significant gap down occurs. The remaining price action for the day occurs to the upside. This triggers a buying spree. Shorts cover their positions due to concern over this price action. Continuation Patterns The indicator recognizes the following continuation patterns.
The fifth day closes at a new high and forces bears to cover their shorts. This is one of the most reliable continuation patterns available. The PZ Candle Patterns indicator can recognize rising and falling patterns of multiple bars in length. Tasuki Gap A continuation pattern with a long white body followed by another white body that has gapped above the first one.
The third day is black and opens within the body of the second day, then fills in the gap between the first two days, but does not close the gap. This suggests that the uptrend will continue and might be a good time to get into the market at a good price. Side by Side Gap A continuation pattern with a long white body followed by another white body that has gapped above the first one.
The gap might be closed or not, but two bullish days announce that the market is inclined to climb higher. This pattern is much more effective if the third day closes above the second day's high.
Windows The same as a Western gap. Windows are continuation candlestick patterns. When the market opens a window to the upside, it is a rising window. It is a bullish candlestick pattern and the rising window should be support. There is much psychology behind windows. Gaps can act as resistance or support. The trend might continue strongly or it might fill the gap first.
The market can also reverse right after a gap. Weakness Patterns The indicator recognizes the following weakness patterns. However, the Advance Block chart alerts traders to the weakness of the upside price action since the close of the second and third days are significantly less than their highs, each bar having a smaller body and longer upper wick than the preceding one. A variation of this pattern, also recognized, is Three Stars in the north and Three Stars in the south, which only difference is that each bar makes a lower high than the previous one.
The key difference is that all of the weakness shows up on the third day. The first two days have powerful upward moves. The quick change in sentiment opens the window for daytraders to initiate shorts or capture profits.
An analogy to this battle can be made between two football teams, which we can also call the Bulls and the Bears. The bottom intra-session low of the candlestick represents a touchdown for the Bears and the top intra-session high a touchdown for the Bulls. The closer the close is to the high, the closer the Bulls are to a touchdown. The closer the close is to the low, the closer the Bears are to a touchdown.
While there are many variations, I have narrowed the field to 6 types of games or candlesticks:. What Candlesticks Don't Tell You. Candlesticks do not reflect the sequence of events between the open and close, only the relationship between the open and the close.
The high and the low are obvious and indisputable, but candlesticks and bar charts cannot tell us which came first. With a long white candlestick, the assumption is that prices advanced most of the session. The first sequence shows two small moves and one large move: The second sequence shows three rather sharp moves: The first sequence portrays strong, sustained buying pressure, and would be considered more bullish. The second sequence reflects more volatility and some selling pressure.
These are just two examples, and there are hundreds of potential combinations that could result in the same candlestick. Candlesticks still offer valuable information on the relative positions of the open, high, low and close. However, the trading activity that forms a particular candlestick can vary.
Some analysts note that for a pattern to qualify as a reversal pattern, there should be a prior trend to reverse.
Bullish reversals require a preceding downtrend and bearish reversals require a prior uptrend. A downtrend might exist as long as the security was trading below its down trend line, below its previous reaction high or below a specific moving average.
The length and duration will depend on individual preferences. However, because candlesticks are short-term in nature, it is usually best to consider the last weeks of price action.
The first candlestick usually has a large real body, but not always, and the second candlestick in star position has a small real body. Depending on the previous candlestick, the star position candlestick gaps up or down and appears isolated from previous price action.
The two candlesticks can be any combination of white and black. Doji, hammers, shooting stars and spinning tops have small real bodies, and can form in the star position. Later we will examine 2- and 3-candlestick patterns that utilize the star position.
A candlestick that forms within the real body of the previous candlestick is in Harami position. Harami means pregnant in Japanese and the second candlestick is nestled inside the first. The first candlestick usually has a large real body and the second a smaller real body than the first.
Doji and spinning tops have small real bodies, and can form in the harami position as well. Later we will examine candlestick patterns that utilize the harami position. There are two pairs of single candlestick reversal patterns made up of a small real body, one long shadow and one short or non-existent shadow.
Generally, the long shadow should be at least twice the length of the real body, which can be either black or white. The location of the long shadow and preceding price action determine the classification. The first pair, Hammer and Hanging Man, consists of identical candlesticks with small bodies and long lower shadows. The second pair, Shooting Star and Inverted Hammer, also contains identical candlesticks, except, in this case, they have small bodies and long upper shadows.
Only preceding price action and further confirmation determine the bullish or bearish nature of these candlesticks.
The Hammer and Inverted Hammer form after a decline and are bullish reversal patterns, while the Shooting Star and Hanging Man form after an advance and are bearish reversal patterns. The Hammer and Hanging Man look exactly alike, but have different implications based on the preceding price action.
Both have small real bodies black or white , long lower shadows and short or non-existent upper shadows. As with most single and double candlestick formations, the Hammer and Hanging Man require confirmation before action. The Hammer is a bullish reversal pattern that forms after a decline.
In addition to a potential trend reversal, hammers can mark bottoms or support levels. After a decline, hammers signal a bullish revival. The low of the long lower shadow implies that sellers drove prices lower during the session. However, the strong finish indicates that buyers regained their footing to end the session on a strong note.
While this may seem enough to act on, hammers require further bullish confirmation. The low of the hammer shows that plenty of sellers remain. Further buying pressure, and preferably on expanding volume, is needed before acting.
Such confirmation could come from a gap up or long white candlestick. Hammers are similar to selling climaxes, and heavy volume can serve to reinforce the validity of the reversal. The Hanging Man is a bearish reversal pattern that can also mark a top or resistance level. Forming after an advance, a Hanging Man signals that selling pressure is starting to increase. The low of the long lower shadow confirms that sellers pushed prices lower during the session. Even though the bulls regained their footing and drove prices higher by the finish, the appearance of selling pressure raises the yellow flag.
As with the Hammer, a Hanging Man requires bearish confirmation before action. Such confirmation can come as a gap down or long black candlestick on heavy volume. Inverted Hammer and Shooting Star.
The Inverted Hammer and Shooting Star look exactly alike, but have different implications based on previous price action. Both candlesticks have small real bodies black or white , long upper shadows and small or nonexistent lower shadows. These candlesticks mark potential trend reversals, but require confirmation before action. The Shooting Star is a bearish reversal pattern that forms after an advance and in the star position, hence its name.
A Shooting Star can mark a potential trend reversal or resistance level. The candlestick forms when prices gap higher on the open, advance during the session and close well off their highs. The resulting candlestick has a long upper shadow and small black or white body. After a large advance the upper shadow , the ability of the bears to force prices down raises the yellow flag.
To indicate a substantial reversal, the upper shadow should relatively long and at least 2 times the length of the body. Bearish confirmation is required after the Shooting Star and can take the form of a gap down or long black candlestick on heavy volume. The Inverted Hammer looks exactly like a Shooting Star, but forms after a decline or downtrend. Inverted Hammers represent a potential trend reversal or support levels. After a decline, the long upper shadow indicates buying pressure during the session.
However, the bulls were not able to sustain this buying pressure and prices closed well off of their highs to create the long upper shadow. Because of this failure, bullish confirmation is required before action. An Inverted Hammer followed by a gap up or long white candlestick with heavy volume could act as bullish confirmation. Candlestick patterns are made up of one or more candlesticks and can be blended together to form one candlestick.
This blended candlestick captures the essence of the pattern and can be formed using the following:. The long lower shadow of the Hammer signals a potential bullish reversal. The long, upper shadow of the Shooting Star indicates a potential bearish reversal.
More than two candlesticks can be blended using the same guidelines: Blending Three White Soldiers creates a long white candlestick and blending Three Black Crows creates a long black candlestick. How To Easily Find Patterns. Der Candlestick Kerzenchart hat seinen Ursprung in Japan. Jahrhundert war es ein Reishändler der die Methode der Kerzencharts entwickelte und erfolgreich angewendet hat.
Jahrhundert fand in Japan überwiegend Tauschhandel statt und das Hauptnahrungsmittel war Reis. Die Behörden akzeptierten sogar Reis als Zahlungsmittel für offene Steuerforderungen.
Während der Binnenmarkt und die Landwirtschaft erstarkten, benötigten die Feudalherren Geld und akzeptierten fortan auch Schuldscheine. Dojima avancierte Mitte des Der Siegeszug des Terminmarktes war nicht aufzuhalten, denn bereits waren von Er versuchte Muster im Chart zu finden und den Preis vorauszusagen.
Flexible Breakout EA Fantastic expert advisor that trades customizable breakouts using market orders or pending orders, as desired. While there are many variations, I have narrowed the field to 6 types of games or candlesticks:.
The resulting candlestick has a long upper shadow and small black or white body. Der Siegeszug des Terminmarktes war nicht aufzuhalten, denn bereits waren von