Hello friends of traders wherever you are,
Are you currently studying the many candlestick patterns? Are you memorizing names like Hammer, Hanging Man, Doji, Shooting Star, Evening Morning Star, Engulfing, and so on?
Feels complicated and confusing doesn't it? It's actually easy, you may not be used to it or don't know the basic concepts.
In this article I will share how to easily understand these candle patterns without having to memorize them. This material is a bit intermediate, for those of you who are beginners it may feel foreign because they know many new terms.
Also keep in mind, candle patterns and chart patterns are 2 different things.
A chart pattern is a collection of several candles, about 5 to 15 candles that form a pattern. Next post I will discuss in more detail about the Chart Pattern. For this time we discuss the Candlestick Pattern first.
Okay... The goal we need to study candlestick patterns is to find out the trend signals are starting to weaken / subside / slow down. There's a reversal signal.
Although there is no guarantee that the price DEFINITELY reverses, the trend may still continue. But at least we can PREPARE for a retrace/pullback condition to appear.
A retrace is a small/short BOWL due to the weakening of the trend. This bounce can be even longer if it turns out that the price is actually REVERSE.
It's like a car when it slows down (brakes) NOT ALWAYS it will turn/turn around. But if you turn around, you have to brake first. Now, the condition of the brakes is the focus of our attention. Candle patterns are able to provide these signals.
THE END OF DOWNTREND. End of DownTrend.
Hammer (A).
Inverted Hammer ( A ).
Engulfing Bullish ( B ).
Harami / Pregnant Bullish ( B ).
Piercing (B).
Morning Star ( C ).
THE END OF UPTRENDS. End of UpTrend.
Hangingman (A).
Shooting Star ( A ).
Engulfing Bearish ( B ).
Harami Bearish ( B ).
Dark Cloud Cover ( B ).
Evening Star ( C ).
Those are the top 12 most popular candlestick patterns in the trading world and I divided them into 2 parts.
6 for the end of the downtrend and 6 for the condition of the end of the uptrend. And there are the same names, for example Engulfing and Harami, just add bullish or bearish, depending on the prediction of the next market direction.
And I divided again into 3 groups, namely A, B, and C.
A = single candle formation (single).
B = double candle formation (double).
C = double candle formation 3 (triple).
Here is a detailed explanation,
1. HAMMER. The Indonesian meaning is PALU, the philosophy is to knock / hit down and bounce up. This means that it is stuck below, the end of the Downtrend.
2. INVERTED HAMMER. The opposite of hammer. If it's a hammer, the head is on top. If the inverted hammer head down. But the same signals the end of the Downtrend.
3. HANGING MAN. The Indonesian meaning of people hanged above. Because it is located at the top, it means the Uptrend is starting to end.
4. SHOOTING STARS. The Indonesian meaning of comet / star falling from the sky. This pattern is the same as hanging man. If the hanging man, the head is up. If the shooting star, the head is at the bottom. And the same signals the end of the Uptrend.
learn candlestick pattern price action inverted hammer evening morning shooting star hanging man engulfing harami doji dark cloud cover piercing
That was 4 candle patterns with a single formation. Please click the image above for a summary. Next is now a pattern with a double candle formation.
5. ENGULFING.
Engulfing means Swallow in Indonesian. Engulfing is a very popular pattern and is easy to spot because the second candle is bigger than the first candle. This can be interpreted as the second candle "eating" or covering the first candle.
It is clear that the weakening of the trend has occurred with the presence of a larger second candle.
Engulfing bullish, the term for the second bullish candle. End of Downtrend.
Engulfing bearish, the name for the second candle is bearish. End of Uptrend.
6. HARAMI / PREGNANT.
The shape is like the belly of a pregnant mother. The second candle is smaller than the first candle. This pattern is considered less popular because the second candle is smaller, meaning the weakening of the trend is not too significant.
Harami bullish, the term for the second bullish candle. End of Downtrend.
Harami bearish, the name for the second candle is bearish. End of Uptrend.
7. PIERCING.
The Indonesian meaning is piercing from below. And if the knife pierces, of course not all parts of the knife are stuck in, it must only be part / half of the knife body. So it means that the second candle covers half of the first candle.
8. DARK CLOUD COVER.
The meaning of the Indonesian language, black clouds began to envelop. Signs of overcast but no rain yet. Jadi means that the second candle covers only half of the first candle. Because it's raining from above, it means the end of the Uptrend.
learn candlestick pattern price action inverted hammer evening morning shooting star hanging man engulfing harami doji dark cloud cover piercing
learn candlestick pattern price action inverted hammer evening morning shooting star hanging man engulfing harami doji dark cloud cover piercing
Please click the image above to see a summary of the pattern with the double candle formation.
Next is a pattern with a double candle formation 3. What is the focus of attention is that candles no. 2 and 3 are the same color and the third candle must be bigger than candle no. 2 as a signal confirmation of the end of the previous trend.
9. MORNING STARS.
Morning means morning in Indonesian. Previously darkness shrouded the night, then came the morning, there was a new glimmer of hope. The end of the dark ages. Meaning in the market is a signal the end of the downtrend.
Downtrend, the movement of the downward trend is likened to night, conditions full of darkness.
10. EVENING STARS.
The Indonesian meaning is late afternoon. The sunlight during the day began to decrease. The end of the joyous period. Meaning in the market is a signal the end of the uptrend.
Uptrend, the movement of the rising trend is likened to a day full of light, joy (euphoria).
learn morning evening star candle pattern
That was the detailed explanation of the 12 popular candle patterns. Actually only 6 only. The remaining 6 stay in the opposite direction. For example piercing and dark cloud cover. Piercing is a condition for ending a downtrend. Dark cloud is a condition where an uptrend ends. But equally the second candle covers half the first candle.
Actually there are many more names of candle patterns, for example tweezer, three white soldiers, three black crows and so on. I feel that the 12 first need to be understood. Later other patterns can automatically understand as well.
The names didn't need to be memorized, it was enough to understand the simple logic, that is, CANDLE APPEARS WITH DIFFERENT COLOR (either bigger or smaller or only half, whatever the shape. Head above or below).
Downtrend conditions then a bullish candle appears, Uptrend conditions then a bearish candle appears. The moment is assumed to be experiencing a weakening / slowing trend. Signals the end of a trend.
All of these patterns will be more effective and valid if they are in a long time frame ( H4-D1-W1 ) because the longer the slowing moment, the greater the possibility of a RETURN.
Just like earlier, when a car brakes, it slows down, there is a signal to turn/turn around. The longer you brake, the more likely it will turn.
HOPE IT IS USEFUL.
CONSISTENT AND OPTIMAL PROFIT GREETINGS.
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