Hello to all, I am new to trading, and still taking my baby steps in the field. I just finished the second grade of the elementary school dedicated to teaching candlestick patterns, and wanted to check if my understanding of these patterns is valid as I believe one ought to understand these rather than memorize them. Please correct me if I’m wrong in my interpretations, I really appreciate.
1- Spinning tops: may be indicative of a change of trend cause there isn’t much action happening, hence the short body, despite a “modest” attempt by both parties to drive the price in their desired direction. The change in trend is due to the fact that this may be indicative of one party losing momentum, and the other one getting ready to push.
2- Long-legged dojis/standard dojis/ four price dojis are in my HUMBLE opinion a potent sign of indecision, as practically no action occured during the session (may be due a party losing steam)
3- Dragonfly doji: When occuring at a downtrend, this demonstrates the sellers’ decrease in pressure, as despite their attempt to further lower the price (long bottom wick), the buyers were still able to reject, and close the candle at, or near at, its open. Hence why most regard it as an indicator of bullish reversal.
4- Gravestone doji: The above, but opposite pretty much.
5- Marubozu: my favorite hhh, cause they don’t leave much to the imagination, and can, I believe, act as confirmation to the candles that require it. My definition of a strong bullish/bearish candle.
6- Hammer: I see it as a more trustworthy dragonfly, pretty much the same story, except with a bigger body. Of course, still needs confirmation.
7- Hanging man: especially when bearish, symbolizes how the buyers lost steam, as the latter probably exhausted their latest push pushing, unsuccessfully or barely successfully against the sellers.
7- Inverted hammer/ shooting star: The hammer, at the end of a downtrend, especially when bullish show how buyers were able to overpower sellers whose last push succeeded merely at lowering the close price below the high. Shooting star is opposite of course.
8- Tweezer bottoms: I believe these show how buyers through persistence, and applying same pressure, manage to change from a bearish candle to an identical bullish one. Indicating that sellers were not able to exert the same pressure the second time. Of course Tweezer tops represent the opposite.
9- Engulfing candles: another ones of my favorite, as I believe they provide a strong indication of where things are going, since they indicate how one party is able to exert pretty much double the opposite power of the party, suggesting dominance.
10- Evening/morning star: a bit of indecision, followed by a change of dominance
11- Three white soldiers/ black crows: Strong dominance established through a “sizeable” timeframe, indicating establishment of trend
12- Three inside in/out: A change of direction without indecision, I believe the third candle is a solid confirmation of where things are going.
Sorry for the long post. Once again, I really appreciate your input and help in understanding things. THANK YOU.
hi, you have to consider time frame and place candlestick pattern on the chart. Pattern on higher time frame is better than on lower time frame, in general. Pattern near support / resistance area, depends on pattern, are more value than randomly placed. Regards Greg
It’s a good idea to study the major candlestick patterns and consider the psychological drivers which must be at work behind the charts. It’s not wasted time even if the major net result is to enable the trader to find patterns which say, “Don’t enter here.”.
Keep in sight also that candlestick patterns seen at the close developed into what they are now from other candlestick patterns along the way.
I think you’ve made a good post, without misunderstandings, and you’ve had two good and helpful replies just above.
My couple of little points, here, are completely subjective and very much ‘personal experience only’.
The logic is good, but I actually find these completely unreliable and I’m really not sure they’re any better than “50/50 random”.
I don’t know why but I find these about the most reliable small candle pattern you can get, and I do very well with them, overall.
It is important to use candlesticks patterns in combination with trend analysis. This also makes the patterns more potent.
Hello @TradingFan2024, No worry about your long post, it is a good way for others to understand those patterns.
When i was started trading, I learn those patterns also throught youtube, blogs, pdfs…, after I found that these patterns don’t work well in the chart, I think they work in a big timeframe (4H, 1 day, 1 week…), If your style is swing or long term trading, It’s good to rely on them for just confirmation, also they work in Support/Resistance, trendline levels…
A tip for you: Work in your psychology, backtest what you learn in a plateform like Gocharting, TradingView… By the time you’ll learn the risk and money management throught courses or articles, blogs…
I just wanted to thank each and everyone who contributed here. I REALLY appreciate you taking the time to read my post, and even more your pieces of advice.
Welcome, my brother.