What is Candlestick?
A candlestick is a type of financial chart used to represent the price movement of an asset, such as a stock or currency, over a specified time period. Each candlestick typically consists of four parts. It is explained with example including data and numbers which helps to understand easily.
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| Candlestick Introduction |
- The Body: This represents the difference between the opening and closing price of the asset during the time period being charted. The body is typically colored either black or white, with black indicating that the closing price was lower than the opening price (i.e. a down day), and white indicating that the closing price was higher than the opening price (i.e. an up day).
- The Shadows: These are the thin lines that extend above and below the body and represent the high and low prices of the asset during the time period being charted.
Example: Let's say a stock had an opening price of $50 on Monday, a high price of $52, a low price of $48, and a closing price of $49. The body of the Monday candlestick would be white, representing that the stock closed higher than it opened, and the shadows would extend above the body to $52 and below the body to $48, representing the high and low prices for the day.
- The Wicks: These are the thin lines that extend from the top and bottom of the body and represent the high and low prices of the asset during the time period being charted.
- The Spinning Tops: This is a type of candlestick pattern where the body is small, indicating a narrow range between the opening and closing prices. The shadows are long, indicating that there was significant volatility during the time period being charted. Candlesticks are used by traders and investors to analyze market trends and make informed trading decisions. By looking at the patterns formed by multiple candlesticks over a given time period, traders can identify trends and make predictions about future price movements. It's important to note that while candlestick charts can provide valuable insights into market trends, they should not be relied upon as the sole source of information when making trading decisions. Other factors, such as market news and economic data, should also be considered.
Powerful Candlestick Patterns with Numerical Examples:
It is very difficult powerful candlestick patterns with numerical examples in a single response. However, here are some of the most commonly used and widely recognized candlestick patterns:
The Bullish Engulfing Candlestick with numerical example.
The Bullish Engulfing pattern is a bullish reversal pattern that occurs when a small red (bearish) candlestick is followed by a large green (bullish) candlestick. The pattern is considered bullish because it indicates that the bears are losing control of the market and that the bulls are taking control, potentially signaling a reversal from a downtrend to an uptrend.
Here is an example of a Bullish Engulfing pattern using numerical values:
Day 1:
Open price: 50
High price: 52
Low price: 48
Close price: 49
Day 2:
Open price: 49
High price: 54
Low price: 48
Close price: 54
In this example, Day 1 represents a bearish (red) candlestick with the close price being lower than the open price. Day 2 represents a bullish (green) candlestick with the close price being higher than the open price. The large green candlestick completely "engulfs" the small red candlestick, indicating that the bulls are taking control of the market and potentially signaling a reversal from a downtrend to an uptrend.
It's important to note that while the Bullish Engulfing pattern can be a powerful signal, it should not be relied upon as the sole source of information when making trading decisions. Other factors, such as market news and economic data, should also be considered.
Bearish Engulfing Candlestick with numerical example.
The "Bearish Engulfing" is a bearish reversal candlestick pattern in technical analysis used in stock or forex trading. It is formed when a small bullish candle is followed by a large bearish candle that completely engulfs the previous day's body. The pattern indicates that the bullish trend is reversing and bears are now in control of the market.
Example:
Suppose the following were the opening, high, low, and closing prices of a stock for two consecutive days:
Day 1:
Opening price: 100
High price: 102
Low price: 99
Closing price: 101
Day 2:
Opening price: 101
High price: 102
Low price: 97
Closing price: 98
In this case, the two candles would form a "Bearish Engulfing" pattern. The first candle would be a small bullish candle with a body from the opening price (100) to the closing price (101). The second candle would be a large bearish candle with a body from the opening price (101) to the closing price (98), completely engulfing the body of the first candle. This pattern indicates that the bullish trend is reversing and bears are now in control of the market.
Hammer with numerical example.
The "Hammer" is a bullish reversal candlestick pattern in technical analysis used in stock or forex trading. It is formed when a stock finishes near its high after trading lower over a period, creating a long lower shadow and a small real body. The pattern indicates that the bearish trend may be reversing and bulls are starting to take control of the market.
Example:
Suppose the following were the opening, high, low, and closing prices of a stock for a single day:
Day 1:
Opening price: 100
High price: 102
Low price: 95
Closing price: 97
In this case, the single candle would form a "Hammer" pattern. The candle would have a small real body (representing the range between the opening price of 100 and the closing price of 97), and a long lower shadow (representing the range between the low price of 95 and the closing price of 97). This pattern indicates that the bearish trend may be reversing and bulls are starting to take control of the market.
Hanging Man with numerical example
The "Hanging Man" is a bearish reversal candlestick pattern in technical analysis used in stock or forex trading. It is formed when a stock finishes near its low after trading higher over a period, creating a long lower shadow and a small real body. The pattern indicates that the bullish trend may be reversing and bears are starting to take control of the market.
Example:
Suppose the following were the opening, high, low, and closing prices of a stock for a single day:
Day 1:
Opening price: 100
High price: 105
Low price: 95
Closing price: 97
In this case, the single candle would form a "Hanging Man" pattern. The candle would have a small real body (representing the range between the opening price of 100 and the closing price of 97), and a long lower shadow (representing the range between the low price of 95 and the closing price of 97). This pattern indicates that the bullish trend may be reversing and bears are starting to take control of the market.
Bullish Harami Candlestick with numerical example:
The "Bullish Harami" is a bullish reversal candlestick pattern in technical analysis used in stock or forex trading. It consists of two candles, with the first candle being a bearish candle and the second candle being a bullish candle that is completely contained within the body of the first candle. The pattern indicates that the bearish trend is reversing and bulls are taking control of the market.
Example:
Suppose the following were the opening, high, low, and closing prices of a stock for two consecutive days:
Day 1:
Opening price: 100
High price: 102
Low price: 98
Closing price: 99
Day 2:
Opening price: 99
High price: 100
Low price: 97
Closing price: 98
In this case, the two candles would form a "Bullish Harami" pattern. The first candle would be a bearish candle with a body from the opening price (100) to the closing price (99). The second candle would be a bullish candle with a body from the opening price (99) to the closing price (98), completely contained within the body of the first candle. This pattern indicates that the bearish trend is reversing and bulls are now in control of the market.
Bearish Harami Candlestick with numerical example:
The "Bearish Harami Candlestick" is a bearish reversal candlestick pattern in technical analysis used in stock or forex trading. It consists of two candles, with the first candle being a bullish candle and the second candle being a bearish candle that is completely contained within the body of the first candle. The pattern indicates that the bullish trend is reversing and bears are taking control of the market.
Example:
Suppose the following were the opening, high, low, and closing prices of a stock for two consecutive days:
Day 1:
Opening price: 100
High price: 105
Low price: 95
Closing price: 102
Day 2:
Opening price: 102
High price: 102
Low price: 98
Closing price: 100
In this case, the two candles would form a "Bearish Harami" pattern. The first candle would be a bullish candle with a body from the opening price (100) to the closing price (102). The second candle would be a bearish candle with a body from the opening price (102) to the closing price (100), completely contained within the body of the first candle. This pattern indicates that the bullish trend is reversing, and bears are now in control of the market.
Morning Star candlestick with numerical example:
The "Morning Star candlestick" is a bullish reversal candlestick pattern in technical analysis used in stock or forex trading. It consists of three candles, with the first candle being a bearish candle, followed by a doji or small-bodied candle in the middle, and then a bullish candle. The pattern indicates that the bearish trend is reversing and bulls are taking control of the market.
Example:
Suppose the following were the opening, high, low, and closing prices of a stock for three consecutive days:
Day 1:
Opening price: 100
High price: 105
Low price: 95
Closing price: 95
Day 2:
Opening price: 95
High price: 95
Low price: 93
Closing price: 94
Day 3:
Opening price: 94
High price: 97
Low price: 93
Closing price: 96
In this case, the three candles would form a "Morning Star" pattern. The first candle would be a bearish candle, the second candle would be a small-bodied doji candle, and the third candle would be a bullish candle. This pattern indicates that the bearish trend is reversing, and bulls are now in control of the market.
Evening Star candlestick with numerical example:
The "Evening Star candlestick" is a bearish reversal candlestick pattern in technical analysis used in stock or forex trading. It consists of three candles, with the first candle being a bullish candle, followed by a doji or small-bodied candle in the middle, and then a bearish candle. The pattern indicates that the bullish trend is reversing, and bears are taking control of the market.
Example:
Suppose the following were the opening, high, low, and closing prices of a stock for three consecutive days:
Day 1:
Opening price: 100
High price: 105
Low price: 95
Closing price: 100
Day 2:
Opening price: 100
High price: 102
Low price: 100
Closing price: 101
Day 3:
Opening price: 101
High price: 102
Low price: 97
Closing price: 98
In this case, the three candles would form an "Evening Star" pattern. The first candle would be a bullish candle, the second candle would be a small-bodied doji candle, and the third candle would be a bearish candle. This pattern indicates that the bullish trend is reversing and that bears are now in control of the market.
Hammer Candle candlestick with examples:
A "hammer candle" is a type of candlestick pattern in technical analysis used in stock trading or forex trading. It is named after the shape of the candle, which looks like a hammer with a long lower shadow and a short body at the top. The long lower shadow indicates that the price was pushed down significantly but eventually bounced back and closed near the opening price.
Example:
Suppose on a particular day, the following were the opening, high, low, and closing prices of a stock:
Opening price: 100
High price: 105
Low price: 95
Closing price: 100
In this case, the hammer candle would look like this:
The body of the candle would be represented by a line from the opening price (100) to the closing price (100), which is short and represents little price movement.
The shadow of the candle would extend from the high price (105) to the low price (95), which is long and indicates significant price movement downward during the day, but the price eventually closed near the opening price, forming a hammer shape.
These are just a few examples of candlestick patterns that traders and investors may look for when analyzing market trends. It's important to note that while candlestick patterns can provide valuable insights into market trends, they should not be relied upon as the sole source of information when making trading decisions. Other factors, such as market news and economic data, should also be considered.
Three Inside Up candlesticks with numerical example.
The "Three Inside Up candlesticks " pattern is a bullish reversal pattern that occurs after a downtrend. It consists of three candlesticks and signals a potential reversal from a downtrend to an uptrend.
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| Three Inside Up candlesticks |
Day 1: Open price: 50 High price: 52 Low price: 48 Close price: 49
Day 2:
Open price: 49
High price: 51
Low price: 46
Close price: 47
Day 3:
Open price: 47
High price: 55
Low price: 47
Close price: 54
In this example, Day 1 and Day 2 represent red (bearish) candlesticks with lower close prices than open prices, indicating a downtrend. On Day 3, the market opens at the low price of the previous day (Day 2) and closes at a higher price, creating a green (bullish) candlestick. The green candlestick is considered "inside" the previous two red candlesticks, hence the name "Three Inside Up." This pattern is considered bullish because it signals a potential reversal from a downtrend to an uptrend.
It's important to note that while the Three Inside Up pattern can be a powerful signal, it should not be relied upon as the sole source of information when making trading decisions. Other factors, such as market news and economic data, should also be considered.
संख्यात्मक उदाहरणको साथ "थ्री इनसाइड अप क्यान्डलस्टिक्स"।
"थ्री इनसाइड अप क्यान्डलस्टिक्स" ढाँचा भनेको डाउनट्रेन्ड पछि हुने बुलिश रिभर्सल ढाँचा हो। यसले तीनवटा क्यान्डलस्टिक्स / मैनबत्तीहरू समावेश गर्दछ र डाउनट्रेन्डबाट अपट्रेन्डमा सम्भावित उल्टो संकेत गर्दछ। यहाँ संख्यात्मक मानहरू प्रयोग गरी थ्री इनसाइड अप ढाँचाको उदाहरण हो: तीन भित्री क्यान्डलस्टिक्स / मैनबत्तीहरू
दिन 1:
खुला मूल्य: 50
उच्च मूल्य: 52
कम मूल्य: 48
बन्द मूल्य: 49
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| Three Inside Up candlesticks |
खुला मूल्य: 49
उच्च मूल्य: 51
कम मूल्य: 46
बन्द मूल्य: 47
दिन ३:
खुला मूल्य: 47
उच्च मूल्य: 55
कम मूल्य: 47
बन्द मूल्य: 54
यस उदाहरणमा, दिन 1 र दिन 2 ले रातो (मन्द) क्यान्डलस्टिक्स खुला मूल्यहरू भन्दा कम नजिकको मूल्यहरू प्रतिनिधित्व गर्दछ, यसले गिरावटको संकेत गर्दछ। ३ दिनमा, बजार अघिल्लो दिनको कम मूल्यमा खुल्छ (दिन २) र उच्च मूल्यमा बन्द हुन्छ, हरियो (बुलिश) क्यान्डलस्टिक सिर्जना गर्दै। हरियो मैनबत्तीलाई अघिल्लो दुई रातो क्यान्डलस्टिक्स / मैनबत्तीहरू "भित्र" मानिन्छ, त्यसैले नाम "थ्री इनसाइड माथि।" यो ढाँचा बुलिश मानिन्छ किनभने यसले डाउनट्रेन्डबाट अपट्रेन्डमा सम्भावित उल्टो संकेत गर्दछ।
यो नोट गर्न महत्त्वपूर्ण छ कि जबकि थ्री इनसाइड अप ढाँचा एक शक्तिशाली संकेत हुन सक्छ, यसलाई व्यापारिक निर्णयहरू गर्दा जानकारीको एकमात्र स्रोतको रूपमा भर पर्नु हुँदैन। बजार समाचार र आर्थिक डेटा जस्ता अन्य कारकहरू पनि विचार गर्नुपर्छ।
संख्यात्मक उदाहरण के साथ "तीन इनसाइड अप कैंडलस्टिक्स"।
"थ्री इनसाइड अप कैंडलस्टिक्स" पैटर्न एक बुलिश रिवर्सल पैटर्न है जो डाउनट्रेंड के बाद होता है। इसमें तीन कैंडलस्टिक्स होते हैं और डाउनट्रेंड से अपट्रेंड में संभावित उलटफेर का संकेत देते हैं।
यहां संख्यात्मक मानों का उपयोग करके थ्री इनसाइड अप पैटर्न का एक उदाहरण दिया गया है:
तीन इनसाइड अप कैंडलस्टिक्स
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| Three Inside Up candlesticks |
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