The entire trading community anonymously says "Japanese Candlestick Charting Techniques" by Steve Nison is the best book on Candlestick Patterns
But the book contains many candlestick patterns.
Do you think it is possible to use all of them in the live market?
Thread 🧵
(1/N)
But the book contains many candlestick patterns.
Do you think it is possible to use all of them in the live market?
Thread 🧵
(1/N)
There are thousands of candlesticks patterns present in the technical analysis world.
Studying and memorizing all these patterns are practically impossible.
It is better to shortlist the patterns based on the “Impact” and “Repeated Occurrence.”
(2/N)
Studying and memorizing all these patterns are practically impossible.
It is better to shortlist the patterns based on the “Impact” and “Repeated Occurrence.”
(2/N)
Because if a candlestick pattern has less impact, then it is not useful.
But, if a candlestick pattern is powerful, but if it rarely occurs, it is of no use.
Considering these two parameters, below are some of the powerful candlestick patterns that occur very frequently.
(3/N)
But, if a candlestick pattern is powerful, but if it rarely occurs, it is of no use.
Considering these two parameters, below are some of the powerful candlestick patterns that occur very frequently.
(3/N)
#1 Bullish Engulfing
Engulfing Pattern involves two candles, with the latter candle ‘engulfing’ the entire body of the candle before it.
This image shows a bullish engulfing formation.
The second candle is the bullish candle that engulfed the first bearish candle.
(4/N)
Engulfing Pattern involves two candles, with the latter candle ‘engulfing’ the entire body of the candle before it.
This image shows a bullish engulfing formation.
The second candle is the bullish candle that engulfed the first bearish candle.
(4/N)
#2 Bearish Engulfing
It is the opposite of bullish engulfing.
This image shows a bearish engulfing formation.
The second candle is the bearish candle, which engulfed the first bullish candle.
(5/N)
It is the opposite of bullish engulfing.
This image shows a bearish engulfing formation.
The second candle is the bearish candle, which engulfed the first bullish candle.
(5/N)
#3 Marubozu
This is simple to identify.
It consists of a single candle without wicks.
It is considered to be very bearish or bullish, depending on the context in which it appears.
(6/N)
This is simple to identify.
It consists of a single candle without wicks.
It is considered to be very bearish or bullish, depending on the context in which it appears.
(6/N)
#4 Doji
In a Doji pattern, the open and close prices will be equal for the selected time period.
It is a neutral pattern that indicates indecision.
This image shows three different variations of Doji.
GD - bearish
ND - Neutral
DD - Bullish
(7/N)
In a Doji pattern, the open and close prices will be equal for the selected time period.
It is a neutral pattern that indicates indecision.
This image shows three different variations of Doji.
GD - bearish
ND - Neutral
DD - Bullish
(7/N)
#5 Morning Star
It is often accompanied by 1-2-3 formations in a downtrend, indicating the sign of the trend.
The first candle is bearish, the second candle indicates indecision, and the third candle indicates the bullish behavior of the price.
(8/N)
It is often accompanied by 1-2-3 formations in a downtrend, indicating the sign of the trend.
The first candle is bearish, the second candle indicates indecision, and the third candle indicates the bullish behavior of the price.
(8/N)
#6 Evening Star
The first candle is bullish, the second candle indicates indecision, and the third candle indicates the bearish behavior of the price.
This pattern consists of three candlesticks that occur in an uptrend and indicate the beginning of the downtrend.
(9/N)
The first candle is bullish, the second candle indicates indecision, and the third candle indicates the bearish behavior of the price.
This pattern consists of three candlesticks that occur in an uptrend and indicate the beginning of the downtrend.
(9/N)
#7 Pinbar
It consists of a long wick on one side and a small body.
It can be considered bullish or bearish based on where it occurs on the chart.
(10/N)
It consists of a long wick on one side and a small body.
It can be considered bullish or bearish based on where it occurs on the chart.
(10/N)
How to use these Patterns?
It is important to use these patterns in conjunction with other technical indicators, such as support/resistance levels, in order to make more informed trading decisions.
For ex, a pinbar in the middle of the swing has no significance!
(11/N)
It is important to use these patterns in conjunction with other technical indicators, such as support/resistance levels, in order to make more informed trading decisions.
For ex, a pinbar in the middle of the swing has no significance!
(11/N)
The same pinbar at a strong resistance zone indicates a possible reversal of the price!
(12/N)
(12/N)
Similarly, Bullish Engulfing in the middle of the swing has no significance!
(13/N)
(13/N)
But the same Bullish Engulfing at the major support level indicates the reversal!
(14/N)
(14/N)
Is there any way to find out these patterns (either for backtesting or trading in the live market)?
Yes, there is a simple way!
Go to gocharting.com -> Indicators -> Candle Patterns, as shown in the image.
(15/N)
Yes, there is a simple way!
Go to gocharting.com -> Indicators -> Candle Patterns, as shown in the image.
(15/N)
We can also identify these patterns as indicators in Tradingview.com
Go to indicators and type the pattern name as shown in the image.
(16/N)
Go to indicators and type the pattern name as shown in the image.
(16/N)
That's a wrap!
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