Candlestick charts are a technical tool that dates back to 18th-century
Japanese rice traders. Candles include multiple time frames at a single price. Candlestick analysis focuses on individual candles, pairs, or triplets to read signs of where the market is going. This makes them more useful than traditional open-high, low-close bars or simple lines that connect the dots of closing prices.
To use the candlestick analysis and trading strategies, we have to learn different candles and their meaning. So let’s go and see the most important Candles and their meanings.
Hanging Man / Hammer
•A small body with a long Shadow (At least twice Bigger)
•No shadow above the body, (or too small)
•Color is not important, both can be Red or Green
Tweezer Bottoms (Bullish)
•A tweezers topping pattern occurs when the highs of two candlesticks
occur at almost the same level following an advance.
•A tweezers bottom occurs when two candles, back to back, occur with very similar lows.
•Like many other candlestick patterns, tweezers occur quite frequently.
•Tweezers are more meaningful as part of other trends, especially pullbacks.
Tweezer Tops (Bearish)
Morning Bullish Reversal
•It consists of three candlesticks and looks something like this. First comes a long red
candle that extends to the current downtrend, signaling the possibility of changing to the uptrend..
•Next comes a short, middle candle that can be the Doji Candle as well.
•After that comes a long green candle, which gaps up on the open and closes above the midpoint of the body of the first day.
•The Size of the third Candle can indicate the strength of the next Trend!
Evening Bearish Reversal
•Consists of three candlesticks and looks something like this. First
comes a long red candle that extends to the current uptrend.
•Next comes a short, middle candle that can be the Doji Candle as well.
•After that comes a long green candle, which gaps up on the open and closes above the midpoint of the body of the first day.
•The Size of the third Candle can indicate the strength of the next Trend!
