Candlestick Patterns For Profit - JD Lasinger
Candlestick Patterns For Profit - JD Lasinger
Content
Introduction to Candlestick Charting
The Hammer Bullish Reversal Candlestick Pattern
Bullish Engulfing Candlestick Reversal Pattern
Three White Soldiers Bullish Reversal Candlestick Pattern
Shooting Star Bearish Reversal Candlestick Pattern
Dark Cloud Cover Bearish Reversal Candlestick Pattern
Bearish Engulfing Reversal Candlestick Pattern
Rising Three Methods Bullish Continuation Candlestick Pattern
The Upside Three Gap Bullish Continuation Candlestick Pattern
Bullish Separating Lines Continuation Candlestick Pattern
Bearish on Neckline Continuation Candlestick Pattern
Downside Tasuki Gap Bearish Continuation Candlestick Pattern
Bearish Thrusting Continuation Candlestick Pattern
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Introduction to Candlestick Charting
I. Shaven Head – Small Body with no wick, but long tail. Indicates a
Bullish reversal.
II. Spinning Tops – Small bodies with small tails and wicks. Indicates
market indecision.
III. Doji – No body with just horizontal line. Indicates market
indecision.
IV. Marobozu – Long body with no wick or tail. White body is bullish
while black body is bearish.
Every candlestick denotes one time period of a chosen time-frame.
For example, if you select the daily time period, then each
candlestick will represent a one day period displaying how the price
of an asset traded throughout that time. This feature implies that a
trading chart, based on the hourly time-frame and displaying price
action over a number of days, will present a series of consecutive
hourly candlesticks, as displayed by the following diagram. In this
figure, bullish candlesticks are black while bearish candlesticks are
red.
The Hammer Bullish Reversal Candlestick
Pattern
Very importantly, you must always ensure that a real ‘Hammer’ has
been created by confirming that its tail is at least double the size of
its body. In fact, the power of the ‘Hammer’ is directly proportional to
the size of the tail. In other words, bigger tails signify larger bullish
momentum.
Many traders exploit the ‘rule of two’ when using trading strategies
based on candlestick technology. Essentially, you should always wait
for the closure of a second candlestick following a ‘Hammer’ to verify
that its bullish intentions are valid. Alternatively, you can also deploy
a second totally different technical indicator to help you achieve this
objective.
Bullish Engulfing Candlestick Reversal Pattern
The first candlestick is often termed the ‘setup’ while the second is
referred to as the ‘confirmation’. The first candle normally possesses
a small body and is created towards the end of a significant bearish
trend.
The second candle is usually so large that it completely covers or
‘engulfs’ the setup one. In addition, the closing price of the
confirmation candle must definitely be higher than that of the setup
candlestick.
The bullish engulfing pattern normally indicates that the market is
forming a distinctive bottom and that the current bearish movement
is terminating. This formation is generated under two main trading
conditions.
1. When the bullish engulfing is formed towards the end of a
long bearish trend then it usually signifies that selling pressure
is waning rapidly and that buyers are starting to control the
market. This is often caused by new buyers being attracted to
assets posting very favorable discounted prices. As such, this
fresh surge in bullish optimism can be so large that it will
completely swamp the previous bearish momentum creating
the bullish engulfing pattern.
2. This pattern is also often generated when the price of an
asset is advancing within a strong bullish trend but has just
undergone a corrective dip by falling and bouncing against a
major support level. This particular trading condition can be
caused by buyers cashing in on their profits; buying orders
thinning out or sellers entering the market at preferential
prices.
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