To invest the money in the market, the person needs to know the direction in which it is moving. This is the reason experts have come up with the concept of candlestick pattern. It is used to predict the future direction of the price movement. It is one of the effective ways of displaying the information related to the asset’s price. The trader will understand a lot of information just by looking at the different price bars. The candlestick has three basic features:
- The body of the candlestick will represent the open-to-close range
- The wick will represent the intra-day high and low
- The colour of the candlestick will reveal the direction of the market movement. Green will indicate that the price is increasing and red will show the decrease in the price.
There are different types of candlestick patterns that are divided into two main parts i.e., Bullish candlestick pattern and bearish candlestick pattern.
- Bullish candlestick patterns: These patterns usually form after the market downtrend or can say it provides signals for the reversal price movement. It will provide the indicators with the knowledge to open the long position of profit. Their patterns are discussed below:
- Hammer: It is usually formed of the short body with long wicks and usually found at the bottom trend. The green colour indicates a stronger bull than the red ones.
- Inverse hammer: In this, the upper wick is long while the lower wick is short. It will indicate the buying pressure followed by selling pressure. It will indicate that the buyer soon will have control of the market.
- Bullish engulfing: it is a combination of two candlesticks in which the first one is the short candlestick that is red, and it is completely engulfed by a larger green candle.
- Piercing line: It is also a two-stick pattern that is made up of long red candles followed by long green candles.
- Bearish candlestick patterns: These patterns usually occur after an up tread and signifies the resistance point. It will open the short position for the traders to take advantage of the falling price. Some of these patterns are given below:
- Hanging man: this pattern is equivalent to hammer and has the same shape, but the form has an uptrend in the end. These will indicate the sell-off during the day.
- Shooting star: This pattern is the same as the inverted hammer but forms an uptrend. In this, the market will gap slightly higher on the opening and will fall like a star on the ground.
- Bearish engulfing: It occurs at the end of the uptrend where the first candle has a small green body that is engulfed by the subsequent long red candle.
- Eventing star: It is a three-candlestick pattern. The shorter candles come in between the two large candles. This will indicate the reversal uptrend in the market.
So, to understand the movement of the market well, it is very important to have proper details regarding them. 5paisa will help their customers to understand each concept of the market well so that they can take all the necessary decisions to be a part of the profitable situation in the future.