Candlestick Patterns
1. What is the Piercing line?
Piercing pattern is a two-day, candlestick price pattern that marks a potential
short-term reversal from a downward trend to an upward trend. The pattern
includes the first-day opening near the high and closing near the low with an
average or larger-sized trading range.
2. What is the morning star?
A morning star is a visual pattern made up of three candlesticks that are read as
bullish signs by technical analysts. A morning star forms a downward trend and it
indicates the start of an upward climb. It is a sign of a reversal in the previous
price trend.
3. What is the Evening star?
Evening Star is a candlestick pattern appearing at the end of the uptrend and
signals that a downtrend is going to take place. It is a bearish
candlestick pattern that consists of three candles: a large bullish candlestick, a
small-bodied candle, and a bearish candle.
4. What are 3 white soldiers?
Three white soldiers are a bullish candlestick pattern that is used to predict the
reversal of the current downtrend in a pricing chart. The pattern consists of three
consecutive long-bodied candlesticks that open within the previous candle's real
body and are close that exceeds the previous candle's high. These candlesticks
should not have very long shadows and ideally, open within the real body of the
preceding candle in the pattern.
5. What are 3 black crows?
Three black crows indicate a bearish candlestick pattern that predicts the reversal
of an uptrend. Candlestick charts show the opening, high, low, and closing prices
of a particular security. For stocks moving higher the candlestick is white or green.
When moving lower, they are black or red.
6. What is the Hanging Man pattern?
A hanging man candlestick occurs during an uptrend and warns that prices may
start falling. The candle is composed of a small real body, a long lower shadow,
and little or no upper shadow. The hanging man shows that selling interest is
starting to increase. For the pattern to be valid, the candle following the hanging
man must see the price of the asset decline.
7. What is the Shooting star?
A shooting star is a bearish candlestick with a long upper shadow, little or no
lower shadow, and a small real body near the low of the day. It appears after an
uptrend. Said differently, a shooting star is a type of candlestick that forms when
security opens, advances significantly, but then closes the day near the opening
again.
8. What is the Dark cloud cover?
Dark Cloud Cover is a bearish reversal candlestick pattern where a down candle
(typically black or red) opens above the close of the prior up candle (typically white
or green), and then closes below the midpoint of the up candle. The pattern is
significant as it shows a shift in the momentum from the upside to the downside.
The pattern is created by an up candle followed by a down candle. Traders look for
the price to continue lower on the next (third) candle.
9. What are red and green candlestick patterns?
In technical analysis, a candlestick pattern is a movement in prices shown
graphically on a candlestick chart that some belief can predict a particular market
movement. The recognition of the pattern is subjective and programs that are used
for charting have to rely on predefined rules to match the pattern.
10. What is OHLC?
An OHLC chart is a type of bar chart that shows open, high, low, and closing
prices for each period. OHLC charts are useful since they show the four major data
points over a period, with the closing price being considered the most important by
many traders.
11. Why there are different shapes of candles?
Candlesticks are useful when trading as they show four price points (open, close,
high, and low) throughout the period the trader specifies.
12. What is engulfing candlestick and what is the difference between
Bullish Engulfing & Bearish Engulfing candlesticks?
A bullish engulfing pattern is a candlestick chart pattern that forms when a small
black candlestick is followed the next day by a large white candlestick, the body of
which completely overlaps or engulfs the body of the previous day's candlestick.
A bearish engulfing pattern is seen at the end of some upward price moves. It is
marked by the first candle of upward momentum being overtaken, or engulfed, by a
larger second candle indicating a shift toward lower prices. The pattern has
greater reliability when the open price of the engulfing candle is well above the
close of the first candle, and when the close of the engulfing candle is well below
the open of the first candle. A much larger down candle shows more strength than
if the down candle is only slightly larger than the up candle.
13. Why do we say power in engulfing candles?
In an engulfing candle, there is a huge body that shows power because there is
a very small or no wick observed in the candle.
14. What if there is no wick in an engulfing candle?
If there is no wick in an engulfing candle then the candle is even more powerful
with no rejection faced.
15. In OHLC of the candles, what is the most important?
Closing is the most important thing in OHLC.
16. In which time frame should we watch Bullish & Bearish Engulfing
Candles?
We can watch Bullish and Bearish Candles in ANY time frame.
17. What is profit booking?
When someone exits from trade in profit that is called profit booking.
18. What are unrealized profits?
Unrealized profits are the profits that we have made in a running trade.
19. What are realized profits?
Realized profits are the profits you have made once you exit from a trade.
20. What causes HPR & LPR?
When the Bullish or Bearish power gets decreased, that causes rejection in the
price and hence there is a wick formed in a candle denoting LPR and HPR.
21. What do the tail, wick, and shadow represent?
Tail, Wick, and Shadow all are the same terms used for the thin line in the
candlestick which represents LPR or HPR.
22. Which one is more important between red hammer and the green
hammer?
The Colour of the candle does not matter in a Hammer candlestick pattern.
Both candles provide some information which is HPR & LPR.
23. What is important in a hammer candlestick pattern?
Only the wick and how long the wick is matters.
24. What does Doji represent?
Doji represents confusion or indecisiveness in the market.
25. What is indecisiveness?
When there is confusion about where the market is going to move ahead, it is
indecisiveness that is created by a Doji.
26. What to do when there is an indecisive candle formed?
We should wait and watch the market until there is a confirmation of a clear
signal.
27. Is piercing a strong or weak pattern?
Piercing is a weak pattern.
28. Is engulfing strong or weak?
Engulfing is a very strong pattern.
29. What to do when there is a piercing pattern?
We should wait for the next candle to be formed for confirmation.
30. Which one is stronger: a Shooting star or a Hanging Man?
The shooting star pattern is much stronger than Hanging Man.
31. When is the Morning Star pattern important?
Morning Star is only important when it is formed in a Downtrend trend.
32. When is the Evening Star pattern important?
The evening star is only important when it is formed in an Uptrend trend.
33. What is a failed Morning Star pattern?
When the third candle of the Morning Star fails to pierce 50% of the size of the
first candle, it is a failed Morning Star.
34. What is a failed Evening Star pattern?
When the third candle of the Evening Star fails to pierce 50% of the size of the
first candle, it is a failed Evening Star.
35. Should we sell on a Failed Morning Star?
No, we should not sell during a Failed Morning Star. We should wait for a
stronger confirmation.
36. Should we buy on a Failed Evening Star?
No, we should not buy during a Failed Evening Star. We should wait for a
stronger confirmation.
37. What is a piercing candle?
When a candle is formed in reverse and closes above/below the 50% body of the
previous candle, it can be called as a piercing candle.
38. Do we have to take any action after a piercing candle?
We do not have to take any action after the formation of a piercing candle. We will
wait for the next candle formation for confirmation of the direction price is going
to move forward.
39. What does a piercing candle indicate?
A piercing candle simply indicates the exhaustion of the previous candle's power.
Nothing else.
40. What are the three kinds of morning star patterns?
➢ Piercing Morning Star
➢ Non-Piercing Morning Star
Engulfing Morning Star
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