Once you know the basics of candlestick chart, candlestick patterns that play crucial role in understanding and forecasting the price action in trading. In this article we will discuss about important single candlestick patterns.
How to trade using single candlestick patterns?
Some Japanese candlestick models consist of a single candlestick. In these models, the shape and color of the candlestick indicate a reversal or continuation of a trend. To get the clearest signals, analyze single candlestick patterns for longer time frames – one hour or longer. To confirm signals, additionally analyze other patterns discussed below.
Hammer:
The Hammer pattern is a trend reversal indicator. Visually, this candlestick looks like a hammer with a small body of any colour and a long lower shadow. There is practically no upper shadow. At the same time, the lower shadow is usually twice as long as the body. It is a down trend candlestick pattern. Open an Up trade if the price fell before this.
Hanging Man:
The Hanging Man pattern is same as Hammer. Only difference is that it is an up trend candlestick pattern. Open a Down trade if the price rise before this.
Shooting Star:
The Shooting Star pattern is a trend reversal indicator. Visually, this candlestick looks like an inverted hammer, with a small body of any color and a long upper shadow. There is practically no lower shadow. At the same time, the upper shadow is usually more than twice as long as the real body. It is an up trend candlestick pattern. Open a Down trade if the price rose before this.
Inverted Hammer:
The Inverted Hammer pattern is same as Shooting Star. Only difference is that it is a down trend candlestick pattern. Open an Up trade if the price fell before this.
Doji:
Doji is an indicator of closing due to indecision in the market. It usually appears when the supply and demand in the market are at an equilibrium. Doji looks like a cross: the opening price is virtually equal to the closing price, and both shadows are long. In this scenario, the decision about the trade should be made in the context of the previous price behavior. Most common dojis are Morning Star and Evening Star dojis.
Morning Star Doji:
The Morning star doji is found in a downtrend and it indicates a trend reversal to upwards direction. So traders should place a Buy trade here.
Evening Star Doji:
The Evening star doji is found in a uptrend and it indicates a trend reversal to downwards direction. So traders should place a Sell trade here.
In our next article we will discuss about important double candlestick patterns for profitable trading. If you are a beginner trader, you need to follow 4 secret steps to earn profit in trading.
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