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3d - The information is about forex trading including candle stick patterns
Business Research Methods (DMS 502)
University of Nairobi
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How to Read Candlestick Charts? Candlestick charts originated in Japan over 100 years before the West had developed bar charts and charts. In the 1700s, a Japanese man known as Homma discovered that as there was a link between price and the supply and demand of rice, the markets were also strongly influenced the emotions of traders. A daily candlestick chart shows the open, high, low, and close prices for the day. The wide or rectangle part is called the which shows the link between opening and closing prices. This real body shows the price range between the open and close of that trading. When the real body is filled, black or red, then it means that the close is lower than the open and is known as the bearish candle. It shows that the prices opened, the bears pushed the prices down and closed lower than the opening price. If the real body is empty, white or green, then it means that the close was higher than the open, known as the bullish candle. It shows that the prices opened, the bulls pushed the prices up and closed higher than the opening price. The thin vertical lines above and below the real body are known as the wicks or shadows, which represent the high and low prices of the trading session. The upper shadow shows the high price, and lower shadow shows the low prices reached during the trading session. High High Upper Shadow Open price Upper Shadow Close price Real Body Real Body Close price Open price Lower Shadow Lower Shadow Low Low elearnmarkets Before we jump into learning about different candlestick charts, there are a few assumptions that need to be kept in mind that are specific to the candlestick charts. 1. Strength is represented a bullish or green candle, and weakness a bearish or red candle. One should ensure that whenever they are buying, it is a green candle day, and whenever they are selling, ensure that a red candle day. 2. The textbook definition of a pattern states certain criteria, but one should state that there could be minor variations to the pattern depending on certain market conditions. 3. One should look for a prior trend. If you are looking at a bullish reversal pattern, then the prior trend should be bearish, and if you are looking for a bearish reversal pattern, then the prior trend should be bullish. How to Read Candlestick Charts? Candlestick charts originated in Japan over 100 years before the West had developed bar charts and charts. In the 1700s, a Japanese man known as Homma discovered that as there was a link between price and the supply and demand of rice, the markets were also strongly influenced the emotions of traders. A daily candlestick chart shows the open, high, low, and close prices for the day. The wide or rectangle part is called the which shows the link between opening and closing prices. This real body shows the price range between the open and close of that trading. When the real body is filled, black or red, then it means that the close is lower than the open and is known as the bearish candle. It shows that the prices opened, the bears pushed the prices down and closed lower than the opening price. If the real body is empty, white or green, then it means that the close was higher than the open, known as the bullish candle. It shows that the prices opened, the bulls pushed the prices up and closed higher than the opening price. The thin vertical lines above and below the real body are known as the wicks or shadows, which represent the high and low prices of the trading session. The upper shadow shows the high price, and lower shadow shows the low prices reached during the trading session. High High Upper Shadow Open price Upper Shadow Close price Real Body Real Body Close price Open price Lower Shadow Lower Shadow Low Low elearnmarkets Before we jump into learning about different candlestick charts, there are a few assumptions that need to be kept in mind that are specific to the candlestick charts. 1. Strength is represented a bullish or green candle, and weakness a bearish or red candle. One should ensure that whenever they are buying, it is a green candle day, and whenever they are selling, ensure that a red candle day. 2. The textbook definition of a pattern states certain criteria, but one should state that there could be minor variations to the pattern depending on certain market conditions. 3. One should look for a prior trend. If you are looking at a bullish reversal pattern, then the prior trend should be bearish, and if you are looking for a bearish reversal pattern, then the prior trend should be bullish. 35 Types of Candlestick Patterns: The candlestick patterns can be divided into: Continuation Patterns Bullish Reversal Patterns Bearish Reversal Patterns Below is the list of 35 Types of Candlestick Patterns which is categorised in the above categories: Bullish Reversal Candlestick Patterns: Bullish Reversal candlestick patterns indicate that the ongoing downtrend is going to reverse to an uptrend. Thus, traders should be cautious about their short positions when the bullish reversal candlestick chart patterns are formed. Below are the different types of bullish reversal candlestick patterns: 35 Types of Candlestick Patterns: The candlestick patterns can be divided into: Continuation Patterns Bullish Reversal Patterns Bearish Reversal Patterns Below is the list of 35 Types of Candlestick Patterns which is categorised in the above categories: Bullish Reversal Candlestick Patterns: Bullish Reversal candlestick patterns indicate that the ongoing downtrend is going to reverse to an uptrend. Thus, traders should be cautious about their short positions when the bullish reversal candlestick chart patterns are formed. Below are the different types of bullish reversal candlestick patterns: 2. Piercing Pattern: Piercing pattern is a multiple candlestick chart pattern formed after a downtrend indicating a bullish reversal. Two candles form it, the first candle being a bearish candle which indicates the continuation of the downtrend. The second candle is a bullish candle which opens the gap down but closes more than of the real body of the previous candle, which shows that the bulls are bac market and a bullish reversal is going to take place. Piercing Pattern Candlestick Pattern Closing should be more than of the previous candlestick elearnmarkets Traders can enter a long position if the next day a bullish candle is formed and can place a at the low of the second candle. Below is an example of a Piercing Candlestick Pattern: Sun Pharmaceutical Industries Ltd., India, NSE:SUN, D 460 450 440 430 427 420 410 1. The trend should be 1. downtrend 2. Bearish Candle 400 3. There should be Gap Down 2. 5. 390 4. Bullish Candle 3 5. Close above 380 up of the previous 4. candle 2. Piercing Pattern: Piercing pattern is a multiple candlestick chart pattern formed after a downtrend indicating a bullish reversal. Two candles form it, the first candle being a bearish candle which indicates the continuation of the downtrend. The second candle is a bullish candle which opens the gap down but closes more than of the real body of the previous candle, which shows that the bulls are bac market and a bullish reversal is going to take place. Piercing Pattern Candlestick Pattern Closing should be more than of the previous candlestick elearnmarkets Traders can enter a long position if the next day a bullish candle is formed and can place a at the low of the second candle. Below is an example of a Piercing Candlestick Pattern: Sun Pharmaceutical Industries Ltd., India, NSE:SUN, D 460 450 440 430 427 420 410 1. The trend should be 1. downtrend 2. Bearish Candle 400 3. There should be Gap Down 2. 5. 390 4. Bullish Candle 3 5. Close above 380 up of the previous 4. candle 3. Bullish Engulfing: Bullish Engulfing is a multiple candlestick chart pattern that is formed after a downtrend indicating a bullish reversal. It is formed two candles, the second candlestick engulfing the first candlestick. The first candle is a bearish candle that indicates the continuation of the downtrend. The second candlestick is a long bullish candle that completely engulfs the first candle and shows that the bulls are back in the market. Bullish Engulfing Candlestick Pattern The second candle engulfing the first candle eléarnmarkets Traders can enter a long position if next day, a bullish candle is formed and can place a at the low of the second candle. Below is an example of a Bullish Engulfing Candlestick Pattern: Reliance Industries Ltd. India, NSE:RELI, D 540 T 530 520 t Downtrend 500 Higher Prices 490 A 480 470 Second bullish candlestick is Investing com Engulfing the body of first bearish candlestick 460 RSI (14) 70 60 53 RSI in the Oversold zone Apr 8 20 May 9 16 23 Jun 8 15 22 3. Bullish Engulfing: Bullish Engulfing is a multiple candlestick chart pattern that is formed after a downtrend indicating a bullish reversal. It is formed two candles, the second candlestick engulfing the first candlestick. The first candle is a bearish candle that indicates the continuation of the downtrend. The second candlestick is a long bullish candle that completely engulfs the first candle and shows that the bulls are back in the market. Bullish Engulfing Candlestick Pattern The second candle engulfing the first candle eléarnmarkets Traders can enter a long position if next day, a bullish candle is formed and can place a at the low of the second candle. Below is an example of a Bullish Engulfing Candlestick Pattern: Reliance Industries Ltd. India, NSE:RELI, D 540 T 530 520 t Downtrend 500 Higher Prices 490 A 480 470 Second bullish candlestick is Investing com Engulfing the body of first bearish candlestick 460 RSI (14) 70 60 53 RSI in the Oversold zone Apr 8 20 May 9 16 23 Jun 8 15 22 5. Three White Soldiers: The Three White Soldiers is a multiple candlestick pattern that is formed after a downtrend indicating a bullish reversal. These candlestick charts are made of three long bullish bodies which do not have long shadows and are open within the real body of the previous candle in the pattern. Three White Soldiers Candlestick Pattern eléarnmarkets 6. White Marubozu: The White Marubozu is a single candlestick pattern that is formed after a downtrend indicating a bullish reversal. This candlestick has a long bullish body with no upper or lower shadows, which shows that the bulls are exerting buying pressure, and the markets may turn bullish. Marubozu Candlestick Pattern eléarnmarkets At the formation of this candle, the sellers should be cautious and close their shorting position. 5. Three White Soldiers: The Three White Soldiers is a multiple candlestick pattern that is formed after a downtrend indicating a bullish reversal. These candlestick charts are made of three long bullish bodies which do not have long shadows and are open within the real body of the previous candle in the pattern. Three White Soldiers Candlestick Pattern eléarnmarkets 6. White Marubozu: The White Marubozu is a single candlestick pattern that is formed after a downtrend indicating a bullish reversal. This candlestick has a long bullish body with no upper or lower shadows, which shows that the bulls are exerting buying pressure, and the markets may turn bullish. Marubozu Candlestick Pattern eléarnmarkets At the formation of this candle, the sellers should be cautious and close their shorting position. 7. Three Inside Up: The Three Inside Up is a multiple candlestick pattern formed after a downtrend indicating bullish reversal. It consists of three candlesticks, the first being a long bearish candle, the second candlestick being a small bullish candle which should be in the range the first candlestick. The third candlestick should be a long bullish candlestick confirming the bullish reversal. Three Inside Up Candlestick Pattern eléarnmarkets The relationship of the first and second candlestick should be of the bullish harami candlestick pattern. Traders can take a long position after the completion of this candlestick pattern. 8. Bullish Harami: The Bullish Harami is multiple candlestick chart pattern which is formed after a downtrend indicating bullish reversal. It consists of two candlestick charts, the first candlestick being a tall bearish candle and second being a small bullish candle which should be in the range of the first candlestick. The first bearish candle shows the continuation of the bearish trend and the second candle shows that the bulls are back in the market. Bullish Harami Candlestick Pattern elearnmarkets Traders can take a long position after the completion of this candlestick pattern. 7. Three Inside Up: The Three Inside Up is a multiple candlestick pattern formed after a downtrend indicating bullish reversal. It consists of three candlesticks, the first being a long bearish candle, the second candlestick being a small bullish candle which should be in the range the first candlestick. The third candlestick should be a long bullish candlestick confirming the bullish reversal. Three Inside Up Candlestick Pattern eléarnmarkets The relationship of the first and second candlestick should be of the bullish harami candlestick pattern. Traders can take a long position after the completion of this candlestick pattern. 8. Bullish Harami: The Bullish Harami is multiple candlestick chart pattern which is formed after a downtrend indicating bullish reversal. It consists of two candlestick charts, the first candlestick being a tall bearish candle and second being a small bullish candle which should be in the range of the first candlestick. The first bearish candle shows the continuation of the bearish trend and the second candle shows that the bulls are back in the market. Bullish Harami Candlestick Pattern elearnmarkets Traders can take a long position after the completion of this candlestick pattern. 11. Three Outside Up: The Three Outside Up is multiple candlestick pattern which is formed after a downtrend indicating bullish reversal. It consists of three candlesticks, the first being a short bearish candle, the second candlestick being a large bullish candle which should cover the first candlestick. The third candlestick should be a long bullish candlestick confirming the bullish reversal. Three Outside Up Candlestick Pattern eléarnmarkets The relationship of the first and second candlestick chart should be of the Bullish Engulfing candlestick pattern. Traders can take a long position after the completion of this candlestick pattern. 12. Pattern: The on neck pattern occurs after a downtrend when a long real bodied bearish candle is followed a smaller real bodied bullish candle which gaps down on the open but then closes near the prior close. The pattern is called a neckline because the two closing prices are the same or almost the same across the two candles, forming a horizontal neckline. Candlestick Pattern Same Neckline eléarnmarkets 11. Three Outside Up: The Three Outside Up is multiple candlestick pattern which is formed after a downtrend indicating bullish reversal. It consists of three candlesticks, the first being a short bearish candle, the second candlestick being a large bullish candle which should cover the first candlestick. The third candlestick should be a long bullish candlestick confirming the bullish reversal. Three Outside Up Candlestick Pattern eléarnmarkets The relationship of the first and second candlestick chart should be of the Bullish Engulfing candlestick pattern. Traders can take a long position after the completion of this candlestick pattern. 12. Pattern: The on neck pattern occurs after a downtrend when a long real bodied bearish candle is followed a smaller real bodied bullish candle which gaps down on the open but then closes near the prior close. The pattern is called a neckline because the two closing prices are the same or almost the same across the two candles, forming a horizontal neckline. Candlestick Pattern Same Neckline eléarnmarkets 13. Bullish The bullish counterattack pattern is a bullish reversal pattern that predicts the upcoming reversal of the current downtrend in the market. This candlestick pattern is a pattern that appears during a downtrend in the market. A pattern needs to meet the following conditions to be a bullish counterattack pattern. There must be a strong downtrend in the market for the formation of the bullish counterattack pattern. The first candle must be a long black candle with a real body. The second candle must also be a long (ideally, equal in size to the first candle) but a white candle with a real body. The second candle must close near the close of the first candle. Bearish Candlestick Pattern: Bearish Reversal candlestick patterns indicate that the ongoing uptrend is going to reverse to a downtrend. Thus, the traders should be cautious about their long positions when the bearish reversal candlestick patterns are formed. Below are the different types of bearish reversal candlestick chart patterns: 13. Bullish The bullish counterattack pattern is a bullish reversal pattern that predicts the upcoming reversal of the current downtrend in the market. This candlestick pattern is a pattern that appears during a downtrend in the market. A pattern needs to meet the following conditions to be a bullish counterattack pattern. There must be a strong downtrend in the market for the formation of the bullish counterattack pattern. The first candle must be a long black candle with a real body. The second candle must also be a long (ideally, equal in size to the first candle) but a white candle with a real body. The second candle must close near the close of the first candle. Bearish Candlestick Pattern: Bearish Reversal candlestick patterns indicate that the ongoing uptrend is going to reverse to a downtrend. Thus, the traders should be cautious about their long positions when the bearish reversal candlestick patterns are formed. Below are the different types of bearish reversal candlestick chart patterns: 15. Dark cloud cover: Dark Cloud Cover is a multiple candlestick pattern formed after the uptrend indicating a bearish reversal. It is formed two candles, the first candle being a bullish candle which indicates the continuation of the uptrend. The second candle is a bearish candle which opens the gap up but closes more than of the real body of the previous candle, which shows that the bears are back in the market and a bearish reversal is going to take place. Dark Cloud Candlestick Pattern The close must be more than elearnmarkets Traders can enter a short position if the next day a bearish candle is formed and can place a at the high of the second candle. Below is an example of a Dark Cloud candlestick Sun Pharmaceutical Industries Ltd., India, NSE:SUN, D 580 1. The prior trend should D 575 570 3 2. Bullish Candle 2 4 565 3. Gap Up 1 560 5 4. Bearish Candle 5. Close below 50 of the previous 550 candle 545 535 525 515 510 505 500 Investing .com 495 6 11 16 19 25 Nov 6 9 14 17 15. Dark cloud cover: Dark Cloud Cover is a multiple candlestick pattern formed after the uptrend indicating a bearish reversal. It is formed two candles, the first candle being a bullish candle which indicates the continuation of the uptrend. The second candle is a bearish candle which opens the gap up but closes more than of the real body of the previous candle, which shows that the bears are back in the market and a bearish reversal is going to take place. Dark Cloud Candlestick Pattern The close must be more than elearnmarkets Traders can enter a short position if the next day a bearish candle is formed and can place a at the high of the second candle. Below is an example of a Dark Cloud candlestick Sun Pharmaceutical Industries Ltd., India, NSE:SUN, D 580 1. The prior trend should D 575 570 3 2. Bullish Candle 2 4 565 3. Gap Up 1 560 5 4. Bearish Candle 5. Close below 50 of the previous 550 candle 545 535 525 515 510 505 500 Investing .com 495 6 11 16 19 25 Nov 6 9 14 17 16. Bearish Engulfing: Bearish Engulfing is a multiple candlestick pattern that is formed after an uptrend indicating a bearish reversal. It is formed two candles, the second candlestick engulfing the first candlestick. The first candle being a bullish candle indicates the continuation of the uptrend. The second candlestick chart is a long bearish candle that completely engulfs the first candle and shows that the bears are back in the market. Bearish Engulfing Candlestick Pattern The second candlestick engulfing the first candlestick elearnmarkets Traders can enter a short position if next day a bearish candle is formed and can place a at the high of the second candle. 16. Bearish Engulfing: Bearish Engulfing is a multiple candlestick pattern that is formed after an uptrend indicating a bearish reversal. It is formed two candles, the second candlestick engulfing the first candlestick. The first candle being a bullish candle indicates the continuation of the uptrend. The second candlestick chart is a long bearish candle that completely engulfs the first candle and shows that the bears are back in the market. Bearish Engulfing Candlestick Pattern The second candlestick engulfing the first candlestick elearnmarkets Traders can enter a short position if next day a bearish candle is formed and can place a at the high of the second candle. 18. Three Black Crows: The Three Black Crows is a multiple candlestick pattern that is formed after an uptrend indicating a bearish reversal. These candlesticks are made of three long bearish bodies that do not have long shadows and open within the real body of the previous candle in the pattern. Three Black Crows Candlestick Pattern elearnmarkets 19. Black Marubozu: The Black Marubozu is a single candlestick pattern which is formed after an uptrend indicating bearish reversal. This candlestick chart has a long bearish body with no upper or lower shadows which shows that the bears are exerting selling pressure and the markets may turn bearish. At the formation of this candle, the buyers should be caution and close their buying position. Black Marubozu Candlestick Pattern elearnmarkets 18. Three Black Crows: The Three Black Crows is a multiple candlestick pattern that is formed after an uptrend indicating a bearish reversal. These candlesticks are made of three long bearish bodies that do not have long shadows and open within the real body of the previous candle in the pattern. Three Black Crows Candlestick Pattern elearnmarkets 19. Black Marubozu: The Black Marubozu is a single candlestick pattern which is formed after an uptrend indicating bearish reversal. This candlestick chart has a long bearish body with no upper or lower shadows which shows that the bears are exerting selling pressure and the markets may turn bearish. At the formation of this candle, the buyers should be caution and close their buying position. Black Marubozu Candlestick Pattern elearnmarkets 20. Three Inside Down: The Three Inside Down is a multiple candlestick pattern that is formed after an uptrend indicating a bearish reversal. It consists of three candlesticks, the first being a long bullish candle, the second candlestick being a small bearish, which should be in the range of the first can The third candlestick chart should be a long bearish candlestick confirming the bearish reversal. The relationship of the first and second candlestick should be of the bearish Harami candlestick pattern. Three Inside Down Candlestick Pattern eléarnmarkets Traders can take a short position after the completion of this candlestick pattern. 21. Bearish Harami: The Bearish Harami is a multiple candlestick pattern formed after the uptrend indicating bearish reversal. It consists of two candlesticks, the first candlestick being a tall bullish candle and second being a small bearish candle which should be in the range of the first candlestick chart. The first bullish candle shows the continuation of the bullish trend and the second candle shows that the bears are back in the market. Bearish Harami Candlestick Pattern eléarnmarkets Traders can take a short position after the completion of this candlestick pattern. 20. Three Inside Down: The Three Inside Down is a multiple candlestick pattern that is formed after an uptrend indicating a bearish reversal. It consists of three candlesticks, the first being a long bullish candle, the second candlestick being a small bearish, which should be in the range of the first can The third candlestick chart should be a long bearish candlestick confirming the bearish reversal. The relationship of the first and second candlestick should be of the bearish Harami candlestick pattern. Three Inside Down Candlestick Pattern eléarnmarkets Traders can take a short position after the completion of this candlestick pattern. 21. Bearish Harami: The Bearish Harami is a multiple candlestick pattern formed after the uptrend indicating bearish reversal. It consists of two candlesticks, the first candlestick being a tall bullish candle and second being a small bearish candle which should be in the range of the first candlestick chart. The first bullish candle shows the continuation of the bullish trend and the second candle shows that the bears are back in the market. Bearish Harami Candlestick Pattern eléarnmarkets Traders can take a short position after the completion of this candlestick pattern. 24. Three Outside Down: The Three Outside Down is a multiple candlestick pattern formed after an uptrend indicating bearish reversal. It consists of three candlesticks, the first being a short bullish candle, the second candlestick being a large bearish candle which should cover the first candlestick. The third candlestick should be a long bearish candlestick confirming the Three Outside Down Candlestick Pattern eléarnmarkets The relationship of the first and second candlestick should be of the Bearish Engulfing candlestick pattern. Traders can take a short position after the completion of this candlestick pattern. 25. Bearish The bearish counterattack candlestick pattern is a bearish reversal pattern that appears during an uptrend in the market. It predicts that the current uptrend in the market will make and the new downtrend will take over the market. Continuation Candlestick Patterns: 26. Doji: Dojipattern is a price action candlestick pattern of indecision that is formed when the opening and closing prices are almost equal. It is formed when both the bulls and bears are fighting to control prices but nobody succeeds in gaining full control of the prices. Doji Candlestick Pattern Opening and closing prices are almost same. eléarnmarkets The candlestick pattern looks like a cross with a very small real body and long shadows. 24. Three Outside Down: The Three Outside Down is a multiple candlestick pattern formed after an uptrend indicating bearish reversal. It consists of three candlesticks, the first being a short bullish candle, the second candlestick being a large bearish candle which should cover the first candlestick. The third candlestick should be a long bearish candlestick confirming the Three Outside Down Candlestick Pattern eléarnmarkets The relationship of the first and second candlestick should be of the Bearish Engulfing candlestick pattern. Traders can take a short position after the completion of this candlestick pattern. 25. Bearish The bearish counterattack candlestick pattern is a bearish reversal pattern that appears during an uptrend in the market. It predicts that the current uptrend in the market will make and the new downtrend will take over the market. Continuation Candlestick Patterns: 26. Doji: Dojipattern is a price action candlestick pattern of indecision that is formed when the opening and closing prices are almost equal. It is formed when both the bulls and bears are fighting to control prices but nobody succeeds in gaining full control of the prices. Doji Candlestick Pattern Opening and closing prices are almost same. eléarnmarkets The candlestick pattern looks like a cross with a very small real body and long shadows. 27. Spinning Top: The spinningtopcandlestick pattern is the same as the Doji, indicating indecision in the market. The only difference between the spinning top and the doji is in their formation, the real body of the spinning is larger as compared to the Doji. Spinning Top Candlestick Pattern eléarnmarkets 28. Falling Three Methods: The three is a bearish, continuation pattern that signals an interruption, but not a reversal, of the ongoing downtrend. The candlestick pattern is made of two long candlestick charts in the direction of the trend i. downtrend at the beginning and end, with three shorter candlesticks in the middle. Falling Three Methods Candlestick Pattern eléarnmarkets The candlestick pattern is important as it shows traders that the bulls still do not have enough power to reverse the trend. 27. Spinning Top: The spinningtopcandlestick pattern is the same as the Doji, indicating indecision in the market. The only difference between the spinning top and the doji is in their formation, the real body of the spinning is larger as compared to the Doji. Spinning Top Candlestick Pattern eléarnmarkets 28. Falling Three Methods: The three is a bearish, continuation pattern that signals an interruption, but not a reversal, of the ongoing downtrend. The candlestick pattern is made of two long candlestick charts in the direction of the trend i. downtrend at the beginning and end, with three shorter candlesticks in the middle. Falling Three Methods Candlestick Pattern eléarnmarkets The candlestick pattern is important as it shows traders that the bulls still do not have enough power to reverse the trend.
3d - The information is about forex trading including candle stick patterns
Course: Business Research Methods (DMS 502)
University: University of Nairobi
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