Types of candlestick patterns:

To understand marketing trends properly you need to understand the types of positioning’s of the candlestick.

With the help of basic components of candlestick body & shadow, patterns are easily interpreted.

Body of the candlesticks shows the distance between closing and opening prices.

Shadow (Upper & Lower Shadow) represents both highest & lowest prices reached during trading accordingly.

There are two main candlestick pattern:

  • Bullish Candlestick Pattern
  • Bearish Candlestick Pattern

The bullish pattern is recognized when the close price is higher than the open price while bearish exactly the opposite that is the close price is very low than the open price.

Other patterns are also categorized into two main pattern Bullish & Bearish.

There is another way to distinguish candlestick patterns, simple & complex patters.

Types:

  • HAMMER: It is categorized in a Bullish Pattern. It is one of the single types. When the market is low (down) because of selling and when people start buying hammer displays. Hammer is basically a short body with a lower shadow. It can be seen at the bottom of the downtrends.

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  • MORNING STAR: It is three stick pattern. Conventionally ‘star’ won’t overlap with the long body as market gaps open and close. It shows the selling pressure of the first day & the bull market in the cards. It is a star-shaped arrangement. We can observe the pattern in the morning i.e. 9:30 a.m. to 11:30 a.m.

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  • SHOOTING STAR: Same as Morning star it has a star-shaped arrangement. The bearish reversal after an uptrend. We can observe it between 11:30 a.m to 2:00 p.m. Distance between open and close price two times larger than a normal shooting star. Open price & closing price is negligible.

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  •  EVENING STAR: Star-shaped arrangement. Similar to morning star it is a three candlestick pattern. Known as Bearish reversal in uptrends. We can see this pattern from2:00 p.m to 3:30 p.m i.e till the market ends. It is a short sandwiched candle.

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  • SPINNING TOP: Variation in thesize of the shadow. It is a Neutral pattern. It gets important when part of different formations. Shadows have equal lengths. Uncertainty in the market leading to no meaningful price changes i.e it is a composition of bull increasing price and bears pushing down sthe price.

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  • DOJI: One of the amazing features of Doji is when the market starts & ends, almost at the same price point every time. It is a four continuation candlestick pattern. Pattern type shows no net gain for both sides as it is a conflict between seller & buyer. This pattern appears everywhere like an uptrend, downtrend, bottom, or in the middle of the trend. It is a very small body between the upper & lower shadow.

There are three categories of Doji:

1. Long-Legged Doji  

2. Dragonfly Doji

3. Gravestone Doji

4. Standard Doji

5. 4-Price Doji

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  • HARAMI: Harami is a Japanese word meaning ‘Preganent’. It is of reversal type. There are two types of Harami candlestick pattern-

Bullish harami: Bullish pattern when preceding the downtrend.

Bearish harami: Bearish pattern when preceding the uptrend.

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  • THREE WHITE SOLDIER: Trader’s entry and exit point. It is a very strong bullish downtrend signal. It indicates steady buying pressure. It has three sticks with small shadows whose closing and opening prices are higher than the previous day.

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  • HANGING MAN: It is similar to the hammer pattern. It has the same shape but a different position to appear i.e uptrend. It is a bearish pattern as it shows buyers pull up prices no matter what the situation gets.

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