Steve Nison in his book ‘Japanese Candlestick Charting Techniques’, discussed this in detail. He also mentioned that different candlestick patterns work for different instruments or markets.
These patterns work. If you master the appropriate patterns for the market you are trading, you will be able to identify when the major participants enter the fray and then subsequently join in.
However, trading has been ushered into an era where the more complicated and confusing a strategy is the better and more popular it is. A majority of those making consistent profits are just using the basic candle stick techniques but keeping their strategies a closely guarded secret.
Hmmm. Tbh, it’s only recently that I started paying any attention to them. I was mostly focused on my system and indicators. But recently, when I spot a familiar candlestick pattern, I try to recall what it usually means. I’ve been encountering hammers and shooting stars.
I haven’t really heard much about Toby Crabel, but thanks for the recommendation! I’d definitely love to see how you also apply it to your trading in the future! Good luuuck!
That’s interesting! Thank you for sharing. I’m curious to know though if candlestick patterns are incorporated in your trading system, or do you mostly rely on them? Do you also try to watch out for other patterns?
Thanks TYG! I also try to use them for this purpose. Since I have limited indicators on my chart, I try to spot the patterns for any potential reversals and breakouts. I’ve only started doing this recently but since it doesn’t really take up all of my time, it’s something I might also incorporate in future trades.
A reasonable question @ria_rose. I trust that by now, you may have found enough information to help arriving at a conclusion for your question.
But my addition to this, keeping it simple is one of the top things most successful retail traders would mention. Candlestick pattern trading is as simple as it can get. I would suggest, that you have a look at some literature that speaks on candlesticks, their patterns and meaning. Find your middle ground, those being, the ones with higher probability of success, research more into it, and see how it may fit into your trading plan. Pinbar and engulfing patterns as previously mentioned, are a good step in the right direction.
I know you will do well, best of wishes to you and continue endeavoring in this quest, you shall prevail.
A reliable candlestck (or bar) I pay attention to is the outside key reversal on the daily time-frame. This is formed when the most recent candlestick has a higher high and a lower low than the previous day’s, plus the close of the recent bar is either above or below the previous day’s range.
From that point on you can treat the high of the outsid bar as reisstance and the low a support. A close above the resistance level or a close below the support level are reliable indicators of the direction of price action that will now follow.
For every pattern that works theres an example it doesnt. Everything looks great in hindisight. IMO it’s nothing more than depecitng price / price action
Some of the best candlestick patterns include the Hammer, signaling a potential bullish reversal, and the Engulfing Pattern, indicating a strong reversal when one candle completely engulfs the previous one. The Doji shows indecision and often signals a trend change.
Do note that this cat uses candlesticks WITHIN the context of a full-scale trading system. I do not take candlesticks “as is” and “on their own”.
So here’s an example:
One part of the system gives me a bias towards a certain direction. Another part gives me a trigger. Other parts can give me confirmation or negation. Each component can be a “+1” or a “-1” to the “score” i give to a given setup.
Say for example I see a downtrending chart. I see a change in bias due to one part of the system saying that momentum is changing from bearish to bullish. Then i see a trigger is about to form on another part of the system to give me a “buy” signal. Candlesticks can come in on this part!
What does kitty look for?
Spiky NEEDLES! (that are on a level of support / resistance as the case may be)
If the spiky needle is on a level of support and that level coincides with the change of momentum indicated by the other parts of the system, then yes i’ll keep an eye on this one for a buy / long trade!
You see, Spiky NEEDLES (Extra long wicks or extra long tails) are signs of rejection (when they are at a level that is a key support or a key resistance): a sign that the current trend is “weakening” and there is a chance for either a retracement or reversal. Either way, there is money to be made!
Thank you so much Twin! All the responses have been very helpful and thank you also for sharing your opinion. Always happy to learn from everyone here. I also noticed you’re fairly new here but you seem to be an experienced trader. If you don’t mind, how long have you been trading?
Thanks for this Tom! I haven’t thought of considering or viewing the highs and lows as resistance and support, but I kinda get how that will work! Super thank youuu!
Hmmm. That makes sense. I feel like it’s a given that, even in strategies, the trades you take can go a different direction. But I think watching out for patterns and using tools somehow help depict price action. Do you use any particular indicator or system for your trading?
not really, i use bollinger bands and fibs this is just purely for profit targets.
I am mainly a mean reversion trader so i need to see big moves before i get involved. I also have longer term macro trades, which is not based on anything technical.
I don’t look at andlestick patterns much. What I am more interested is the overall context. Have we been rallying for a long time? Is price stalling at a resistance? How is the risk to reward on this? How can I manage this trade if it goes against me?
When context is looking good, then I might observe the candles more closely. But if context isn’t right, candlestick patterns will be not that useful.
Candlestick patterns can be powerful tools! I watch for Morning Stars, Engulfing patterns, and Doji at key levels. They’re not a waste if used with support/resistance or trend analysis, they add an extra layer of insight. Keep at it!
Candlestick patterns are definitely not a waste of time! Many traders find them helpful for spotting potential market reversals or continuations. Patterns like doji, engulfing, or hammer can offer valuable insight. However, it’s important to combine candlestick analysis with other tools to confirm signals and manage risk effectively.
Tbh, it’s only recently that I started paying any attention to them. 
But recently, when I spot a familiar candlestick pattern, I try to recall what it usually means. I’ve been encountering hammers and shooting stars. 
I’d definitely love to see how you also apply it to your trading in the future! 
I also noticed you’re fairly new here but you seem to be an experienced trader. If you don’t mind, how long have you been trading? 