Ten lessons from my book: “The Ultimate Guide to Candlestick Chart Patterns”
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The larger the candle, the higher the volatility of price action, and the smaller a candle is, the tighter a trading range has become. Increasing candle size indicates expanding volatility, while candles getting smaller shows contracting volatility.
Hammers have a higher probability of being a valid reversal signal when found inside a chart trending downward.
After a single hammer candle forms during a downtrend, the next day’s candle should open inside the hammer price range, or higher, to confirm that a potential reversal higher did take place.
When using the inverted hammer as a reversal buy signal, waiting for the next candle to confirm a move higher can increase the odds of success.
A dragonfly doji can act as a signal for a potential reversal in a downtrend of price action if it happens near the lows in price action on a chart.
High trading volume in correlation with the candle pattern increases the probability of success with positions.
A spinning top candle is primarily used in technical analysis as a signal that a trend or range is changing. If the spinning top candle forms after a downtrend or range in a market’s price action, it can signal a good probability of a reversal higher.
A bullish harami candlestick pattern has better odds of working if it happens on a chart in an oversold area like a 30 RSI, or at a lower 2nd or 3rd deviation from the 20-day moving average.
Individual bullish candles on a chart illustrate buying pressure that drives prices higher from the open to the close. A bullish candle shows that buyers can hold higher prices until the close.
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