Important Candlestick Patterns and their impacts

In this article, we will discuss the Important Candlestick Patterns and their impacts.

Hundreds of candlestick patterns are used by the traders in trading industry. But it is not possible to remember the entire pattern and also it confused you. That’s why we picked up only nineteen patterns of the candlestick for you, and believe it is more than enough to have a solid understanding of candlestick formations and their meaning. Let’s learn about these Important Candlestick patterns and their impacts.

Doji Candle:

It is a neutral pattern. A Doji has a small real body, indicating that the opening and closing prices are very close or virtually the same. That’s why it is known as the indecision candle. This candle can appear in several different patterns. Refer to Figure -2.1 for visualization.

This image showing Doji Candle which is one of the candlestick patterns and indicates neutral pattern

Gravestone Doji:

It is a bearish pattern. This candle signifies another turning point. It occurs when the open, close, and low are the same and the high is significantly higher than the open, low, and closing prices. Refer to Figure -2.2 for visualization.

This image showing Gravestone Doji Candle which is one of the candlestick patterns and indicates bearish pattern.

Double Doji:

It is a neutral pattern. The double Doji pattern is formed when two consecutive Doji appears in the same price range. This implies a forceful move will follow a breakout from the current indecision. Refer to Figure -2.3 for visualization.

This image showing Double Doji Candle which is one of the candlestick patterns and indicates neutral pattern.

Star:

It is a bearish pattern. Stars indicate reversals. A star is a candle with a small real body that occurs after a candle with a much larger real body. Where the real bodies do not overlap, although the wicks may overlap. Refer to Figure -2.4 for visualization.

This image showing star Candle which is one of the candlestick patterns and indicates bearish pattern.

Spinning Top:

These are Neutral candles. They occur when the distance between the high and the low, and the distance between the open and the close are relatively small. Refer to Figure -2.5 for visualization.

This image showing Spinning Top Candle which is one of the candlestick patterns and indicates neutral pattern.

Harami Candles:

These are neutral patterns. This pattern indicates a decrease in momentum. It occurs when a candle with a small body falls within the area of a larger body. As you can see in Figure-2.6 a bullish candle with a long body is followed by a weak bearish candle and implies a decrease in the bullish momentum.

This image showing Harami Candle Candle which is one of the candlestick patterns and indicates neutral pattern.

Dark cloud cover:

This is a bearish pattern. This is more significant if the second candle’s body is below the center of the previous candles’s body as you can see in Figure- 2.7

This image showing Dark cloud coverCandle which is one of the candlestick patterns and indicates bearish pattern.

Bearish Engulfing Candles:

This is a bearish pattern. This pattern is strong and bearish if it occurs after a significant uptrend. This pattern acts as a reversal pattern. It occurs when a small bullish candle is engulfed by a large bearish candle. Refer to Figure -2.8 for visualization.

This image showing Bearish Engulfing Candle which is one of the candlestick patterns and indicates bearish pattern.

Evening star:

This is a bearish pattern signifying a potential top. This evening star indicates a possible reversal and the bearish candle confirms it. The evening star can be green or red or it can be a Doji star. Refer to Figure -2.9 for visualization.

This image showing Evening star Candle which is one of the candlestick patterns and indicates bearish pattern.

Doji star:

This is a bearish pattern. A star indicates a reversal and a Doji indicates indecision. Thus, this pattern usually indicates a reversal after an indecisive period.  You should wait for a confirmation, such as an evening star illustration, before trading a Doji star. Refer to Figure -2.10 for visualization.

This image showing Doji star Candle which is one of the candlestick patterns and indicates bearish pattern.

Shooting star:

This is a bearish pattern. This pattern suggests a minor reversal when it appears after a rally. The star’s body must appear near the low price, and the candle should have a long upper shadow. Refer to Figure -2.11 for visualization.

This image showing shooting star Candle which is one of the candlestick patterns and indicates bearish pattern.

Long legged Doji:

This is a bearish pattern. This candle often signifies a turning point. It occurs when the open and close are the same, and the range between the high and the low is relatively large. Refer to Figure -2.12 for visualization.

This image showing long legged Doji Candle which is one of the candlestick patterns and indicates bearish pattern.

Dragonfly Doji:

This is a bearish pattern. This candle also signifies a turning point. This pattern occurs when the open and close are the same and the low is significantly lower than the open, high, and closing prices. Refer to Figure -2.13 for visualization.

This image showing Dragonfly Doji Candle which is one of the candlestick patterns and indicates Bearish pattern.

Hammer:

This is a bullish candle if it occurs after a significant downtrend. If the candle occurs after a significant uptrend.it is called a hanging man. A hammer is identified by a small body (a small range between the open and closing price) and a long lower shadow (the low is significantly lower than the open, high, and closes). The body can be red or green. Refer to Figure -2.14 for visualization.

This image showing Hammer Candle which is one of the candlestick patterns and indicates bullish pattern.

Piercing Candle:

This is a bullish pattern and the opposite of a dark cloud cover. The first candle on the left is a bearish candle, and the second candle is a bullish candle. The second candle opens lower than the first candle’s low but closes more than halfway above the first candle’s real body. Refer to Figure -2.15 for visualization.

This image showing Piercing Candle which is one of the candlestick patterns and indicates bullish pattern.

Bullish engulfing candles:

This pattern is strongly bullish if it occurs after a significant downward rally. This pattern acts as a reversal pattern. It occurs when a small bearish candle is engulfed by a large bullish candle. Refer to Figure -2.16 for visualization.

This image showing Bullish Engulfing  Candle which is one of the candlestick patterns and indicates Strong Bullish pattern.

Morning star:

This is a bullish pattern signifying a potential bottom, the star, at the bottom between the two candles, indicates a possible reversal. The bullish candle confirms this reversal. The star can be red or green. Refer to Figure -2.17 for visualization.

This image showing Morning star Candle which is one of the candlestick patterns and indicates bullish pattern.

Bullish Doji star:

This is a bullish pattern. A star indicates a reversal and a Doji indicates indecision. Thus, this pattern usually indicates a reversal after an indecisive period. You should wait for a confirmation, as in the morning star in the previous pattern, before trade execution on the Doji star. The first candle can be red or green, it does not matter. Refer to Figure -2.18 for visualization.

This image showing Bullish Doji star Candle which is one of the candlestick patterns and indicates bullish pattern.

Hanging man:

These candles are bearish if they occur after a significant uptrend. And if the pattern occurs after a significant downtrend it is called a hammer pattern. These candles are identified by small real bodies (A small range between open and closing price) and long lower wick. That is, the low was significantly lower than the open, high, and close. The bodies can be red or green, it doesn’t matter. Refer to Figure -2.19 for visualization.

This image showing Hanging Man Candle which is one of the candlestick patterns and indicates bearish pattern candles.

It’s important to note that while candlestick patterns can provide insights, they are not foolproof indicators and should be used in conjunction with other technical analysis tools and risk management strategies. It is better to have multiple confluences with the above candlestick patterns for getting an extra edge on your trading.

I hope this article is helpful for you to understand the Important Candlestick Patterns and their impacts.

Stay tuned to our website for more tutorials about Forex Market. If you have any suggestions or queries, feel free to Contact us or drop your message in the comment section below.

In this article, we will discuss the Important Candlestick Patterns and their impacts. Hundreds of candlestick patterns are used by the traders in trading industry. But it is not possible to remember the entire pattern and also it confused you. That’s why we picked up only nineteen patterns of the candlestick for you, and believe it…

Leave a Reply

Your email address will not be published. Required fields are marked *