Candlestick patterns are graphical representations of price movements in financial markets, often used in technical analysis to help predict future price movements. There are many different candlestick patterns, but here are some of the most commonly used ones:
- Bullish Engulfing: This pattern occurs when a small red candlestick is followed by a large green candlestick, indicating a potential trend reversal from bearish to bullish.
- Bearish Engulfing: This pattern occurs when a small green candlestick is followed by a large red candlestick, indicating a potential trend reversal from bullish to bearish.
- Hammer: This pattern occurs when a small real body is formed near the low of the day, with a long lower shadow, indicating potential bullish reversal.
- Shooting Star: This pattern occurs when a small real body is formed near the high of the day, with a long upper shadow, indicating potential bearish reversal.
- Morning Star: This pattern is composed of three candlesticks and indicates a potential trend reversal from bearish to bullish.
- Evening Star: This pattern is composed of three candlesticks and indicates a potential trend reversal from bullish to bearish.
- Doji: This pattern occurs when the opening and closing prices are nearly equal, indicating indecision in the market and potential trend reversal.
These are just a few of the many different candlestick patterns that can be used in technical analysis. It’s important to keep in mind that while candlestick patterns can provide useful insights, they should be used in conjunction with other forms of analysis and not relied upon solely for investment decisions.