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Candle Types

The document discusses various candlestick patterns and their meanings, including: - The hammer candlestick which indicates buying pressure drove prices up after an initial drop. - The morning star pattern seen as a sign of hope in a downtrend, showing subsiding selling pressure. - The three white soldiers pattern of three long green candles opening and closing higher signals a strong bull market. - Bearish patterns like dark cloud cover and shooting stars signal trend reversals from bull to bear markets.

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Marcel Proust
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2K views19 pages

Candle Types

The document discusses various candlestick patterns and their meanings, including: - The hammer candlestick which indicates buying pressure drove prices up after an initial drop. - The morning star pattern seen as a sign of hope in a downtrend, showing subsiding selling pressure. - The three white soldiers pattern of three long green candles opening and closing higher signals a strong bull market. - Bearish patterns like dark cloud cover and shooting stars signal trend reversals from bull to bear markets.

Uploaded by

Marcel Proust
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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candles

is found at the bottom of a


downward trend.

A hammer shows that


although there were selling
pressures during the day,
ultimately a strong buying
pressure drove the price
back up. The colour of the
body can vary, but green
hammers indicate a
stronger bull market than
red hammers.
It indicates a buying
pressure, followed by
a selling pressure that
was not strong
enough to drive the
market price down.
The inverse hammer
suggests that buyers
will soon have control
of the market.
The first candle is a
short red body that is
completely engulfed by
a larger green candle.

Though the second day


opens lower than the
first, the bullish market
pushes the price up,
culminating in an
obvious win for buyers.
There is usually a significant gap down between the first candlestick’s
closing price, and the green candlestick’s opening. It indicates a strong
buying pressure, as the price is pushed up to or above the mid-price of
the previous day
The morning star candlestick pattern is considered a sign of hope in a bleak market downtrend. It is
a three-stick pattern: one short-bodied candle between a long red and a long green. Traditionally,
the ‘star’ will have no overlap with the longer bodies, as the market gaps both on open and close.

It signals that the selling pressure of the first day is subsiding, and a bull market is on the horizon.
The three white soldiers pattern occurs over three days. It consists of consecutive
long green (or white) candles with small wicks, which open and close progressively
higher than the previous day.

It is a very strong bullish signal that occurs after a downtrend, and shows a steady
advance of buying pressure.
Bear candles
forms at the end of an uptrend.

It indicates that there was a significant sell-off during the day, but that buyers were
able to push the price up again. The large sell-off is often seen as an indication that
the bulls are losing control of the market.
The shooting star is the same shape as the inverted hammer, but is formed in an
uptrend: it has a small lower body, and a long upper wick.

Usually, the market will gap slightly higher on opening and rally to an intra-day high
before closing at a price just above the open – like a star falling to the ground.
at the end of an uptrend. The first candle has a small green body that is engulfed by a subsequent
long red candle.

It signifies a peak or slowdown of price movement, and is a sign of an impending market downturn.
The lower the second candle goes, the more significant the trend is likely to be.
the equivalent of the bullish morning star. It is formed of a short candle sandwiched
between a long green candle and a large red candlestick.

It indicates the reversal of an uptrend, and is particularly strong when the third
candlestick erases the gains of the first candle.
three consecutive long red candles with short or non-existent wicks. Each session opens at a similar
price to the previous day, but selling pressures push the price lower and lower with each close.

Traders interpret this pattern as the start of a bearish downtrend, as the sellers have overtaken the
buyers during three successive trading days.
indicates a bearish reversal – a black cloud over the previous day’s optimism. It comprises two
candlesticks: a red candlestick which opens above the previous green body, and closes below its
midpoint.

It signals that the bears have taken over the session, pushing the price sharply lower. If the wicks of
the candles are short it suggests that the downtrend was extremely decisive.
Continuation candles
This doji’s pattern conveys a struggle between buyers and sellers that
results in no net gain for either side. Alone a doji is neutral signal, but it
can be found in reversal patterns such as the bullish morning star and
bearish evening star.
The spinning top candlestick pattern has a short body centred between wicks of
equal length. The pattern indicates indecision in the market, resulting in no
meaningful change in price: the bulls sent the price higher, while the bears pushed
it low again. Spinning tops are often interpreted as a period of consolidation, or
rest, following a significant uptrend or downtrend.

On its own the spinning top is a relatively benign signal, but they can be interpreted
as a sign of things to come as it signifies that the current market pressure is losing
control.
The bearish pattern is called the ‘falling three methods’. It is
formed of a long red body, followed by three small green
bodies, and another red body – the green candles are all
contained within the range of the bearish bodies. It shows
traders that the bulls do not have enough strength to reverse
the trend.
The opposite is true for the bullish pattern, called the
‘rising three methods’ candlestick pattern. It comprises
of three short reds sandwiched within the range of two
long greens. The pattern shows traders that, despite
some selling pressure, buyers are retaining control of
the market.

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