Candlestick is the most important way of expressing the market either in Stocks, Forex, Commodities, Binary Option, Digital or Crypto Currencies.
Candlestick is a medium to communicate with market through BUY or SELL.
Basically, there are 2 Candles which represents the whole Forex, Stocks, Assets, Binary Options, Digital Market. As shown in the fig given below.
1) Bullish Candle.(Green Candle)
2) Bearish Candle. (Red Candle)
The Candle conveys 4 pieces of information:
1. The Open price.
2. The Close price.
3. The Upper price.
4. The low price.
A Candlestick pattern is a movement of prices it gives us the current & historical information.
The wicks, or shadows, are the thin lines that go outside the rectangular body of the candle. They represent the high and the low price during that time period.
The color of the candle is also significant in understanding whether the open price was higher or lower than the close price.
If the candle is Red, or denoted as Bearish in some other manner, this means that the open price is lower than the close; and the opposite is true if the candle is green,
Or denoted as Bullish.
1.Hammer:
The hammer is a type of most important Bullish reversal candlestick pattern.
This single candlestick is used by many traders to trade stocks, ETFs, commodities and forex.
This is a powerful candle with one long lower shadow that occurs when a market significantly lower than its opening price, but rallies later in the day to close either above or near its opening price.
where the leg of hammer should be at least double of its real body then it indicates a very Bullish signal.
Criteria of taking Trade:
1. The lower shadow should be at least two times the length of its real body.
2. The real body should be at the lower end of the trading range.
3. The color of the body is not important although a white/green body should have slightly more important for Bullish signal.
4. There should not be an upper shadow or a very small upper shadow.
5. Another candle needs to confirm the Hammer signal with a white/green candle & a gap up with a higher close.
6. The longer the lower shadow of Hammer, the higher the potential of a reversal occurring.
7. A little gap up from the previous day close sets up for a stronger reversal move provided the day after the Hammer signal trades higher.
8. The candle should be formed at the Support zone.
2. Inverted Hammer:
The Inverted Hammer is a type of Bullish reversal candlestick pattern.
This is a powerful candle with a long shadow that occurs when a market significantly higher than its opening price, but rallies later in the day to close either above or near its opening price.
The Inverted Hammer looks like an upside-down version of the Inverted Hammer candlestick pattern, the upper shadow of Inverted Hammer should be at least double of its real body then it indicates a very Bullish signal, and when it appears in an uptrend is called a Shooting star.
When you see the Inverted Hammer after a downtrend this is a great sign of a potential reversal of the market but before placing any order you should weight for the next candle to open higher than the close of the previous candle & should be closed above of the previous candle to confirm the Bullish sign.
Criteria of taking Trades:
1. The upper shadow should be at least two times the length of its real body.
2. The real body should be at the upper end of the trading range.
3. The color of the body is not important although a white/green body should have slightly more important for bullish signal.
4. There should not be an upper shadow or a very small upper shadow.
5. The another candle needs to confirm the Inverted Hammer signal with a white/green candle & a gap up with a higher close.
6. The longer the upper shadow of Inverted Hammer, the higher the potential of a reversal occurring.
7. A little gap up from the previous day’s close sets up for a stronger reversal move provided the day after the Inverted Hammer signal trades higher.
8. The candle should be formed at the Support zone.
3. Hanging Man:
Hanging man is a Bearish reversal candlestick pattern.
It is made up of just one candle with a long lower shadow &has a small real body at the upper end of the candle. A small upper shadow may or may not appear above the body, which is Bearish in nature and appears at the end of the uptrend trend.
A hanging man candle is identical to the hammer but it appears at the end of uptrend.
Criteria of taking Trades:
1. The lower shadow should be at least two times the length of its real body.
2. The real body should be at the upper end of the trading range.
3. The color of the body is not important although a black/red body should have slightly more important for bearish signal.
4. There should not be an upper shadow or a very small upper shadow.
5. The another candle needs to confirm the Hanging Man signal with a black/red candle & a gap down with a lower close.
6. The longer the lower shadow of Hanging Man, the higher the potential of a reversal occurring.
7. A little gap up from the previous day’s close sets up for a stronger reversal move provided the day after the Hanging Man signal trades lower.
8. The candle should be formed at the Resistance zone.
4. Shooting Star:
The Shooting Star is a type of most powerful Bearish reversal candlestick pattern comprise short candles with one long wick that occurs when a market significantly higher than its opening price, but rallies later in the day to close either above or near its opening price.
The Shooting Star looks like exact Inverted hammer but it forms in uptrend, the upper shadow of Shooting Stars should be at least double of its real body then it indicates a very high Bearish signal.
When you see the Shooting Star after a uptrend this is a great sign of a potential reversal of the market but before placing any order you should wait for the next candle to open upper than the close of the previous candle.
When you see the Shooting Star after a downtrend this is a great sign of a potential reversal of the market but before placing any order you should wait for the next candle to open higher than the close of the previous candle to confirm the Bullish signal.
Criteria of taking Trades:
1. The upper shadow should be at least two times the length of its real body.
2. The real body should be at the upper end of the trading range.
3. The color of the body is not important although a white/green body should have slightly more important for Bullish signal.
4. There should not be an upper shadow or a very small upper shadow.
5. The another candle needs to confirm the Shooting Star signal with a white/green candle & a gap up with a higher close.
6. The longer the upper shadow of Shooting Star, the higher the potential of a reversal occurring.
7. A little gap up from the previous day’s close sets up for a stronger reversal move.
8. The candle should be formed at the Resistance zone.
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