One Candlestick Patterns One candlestick patterns are tools of technical analysis that show the potential reversal or continuation in financial markets. Such patterns on the price chart would be no greater than one candlestick and may be an indication of valuable insight into the market sentiments that may periodically shift in price.
Types of Single Candlestick Patterns
Following is a list of some commonly used single candlestick patterns:
Reversal Patterns
Hammer: The little body has a long lower shadow, maybe implying a probable reversal from a downtrend.
Inverted Hammer: The little body has a long upper shadow, may indicate a possible reversal from an uptrend.
Shooting Star: A small body with a long upper shadow and a small lower shadow depicts the potential reversal from an uptrend.
Hanging Man: A small body with a long lower shadow and a small upper shadow; this can be an indication of a reversal from a downtrend.
Continuation Patterns
Doji: A small body with upper and lower shadows of equal or about equal length, reflecting indecision or a possible pause in the current trend.
Spinning Top: A candlestick which consists of a small body with long upper and lower shadows; this can be indication of a pause to the current trend.
Things to Remember When Attempting to Trade Candlestick Patterns Volume: Volume can sometimes help confirm a signal given by a candlestick pattern. Very low volume might render it weaker.
Context: A candlestick pattern should always be viewed in the larger perspective of the market, and of the instrument being traded.
Confirmation: Quite often, one would want confirmation through other forms of technical indicators or chart patterns to confirm what one’s candlestick pattern has shown.
Conclusion
While the candlestick patterns can be an efficient tool of technical analysis, they definitely aren’t perfect and shouldn’t be used in isolation from other indicators and strategies.
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