What are the commonly used candlestick patterns in price action trading Part 3

Candlestick patterns are used to predict the future direction of price movement.

Candlestick patterns are used to predict the future direction of price movement.

1. Spin top

Spinning Top High Wave Definition edited

The candle patterns has a pretty small range, and the shadows are relatively small. Traders may express disinterest when low volume is combined.

Spinning Top High Wave Definition:

A Spinning Top Wave candle, also known as a High Wave candle, is a candlestick with a small genuine body and an open and close price that are close to each other. They also have extended upper and lower shadows that are far longer than their bodies. These candlesticks represent indecision followed by consolidation.

Spin top

2. High wave candle

wave

The high wave candle, on the other hand, depicts a situation in which the bulls and bears are actively engaged in a tug of war. This candle indicates that the market has lost its sense of direction. If it happens frequently, it demonstrates the market’s general uncertainty about where prices are headed.

  • High Wave candles reveal traders’ perplexity.
  • The true body’s size reveals a lack of unanimity among traders on how to keep the present trend going.
  • The candle has a modest genuine body of either hue and indicates an early sign of a likely shift in the present uptrend or downturn.
  • Both shadows are very long, but they do not have to be exactly the same length.
  • Don’t pay attention in a trading range: the price is paused before bursting out.
  • When dealing with such candles, exercise caution.

3. Three black crows candle

three black crows candle 1

The three crows in black In stock trading, candle formation is rare, but when it develops, swing traders should be on the lookout for the crow’s caw. Three crows sitting in a tall tree represent the candlestick. If the first “crow”, or dark candlestick, closes below the previous candle’s true body on the day the first black crow appears, the configuration is most prophetic. After that, there are two more down days in a row. Each of these days, the stock appears to desire to reclaim its earlier power, as it opens higher than the previous day’s closing. At the end of each session, the sellers get back in charge, and the stock falls to a new closing low.

three black crows candle 1 1

4. The three white soldiers

white soldiers

When the three white soldiers pattern appears after an extended period of collapse and subsequent consolidation, it is most powerful. When a stock has a decrease followed by sideways movement, the sight of three white soldiers at that point indicates that higher prices are likely to follow.

A reversal candle is the first of the three white soldiers. It either signals the end of a downtrend or the beginning of a period of consolidation following a decline. On day two, the candle may burn within the true body of the first day. As long as the candle of day two opens in the top half of day one’s range, the pattern is legitimate. The stock should close near its high at the conclusion of day two, leaving a very minor or non-existent upper shadow. On day three, the same process is followed.

white soldiers 1

5. The tweezers

The tweezers

Two candles are always used in the tweezers configuration. The high price of two close sessions is identical or almost identical at the tweezers top. There may be a few cents difference in a high-priced stock, but I feel it should still be considered a loss.

The low price of two sessions that arrive close together is the same as the bottom of a tweezers. Let’s simply talk about the bottom of the tweezers for now. The tweezers’ bottom is sometimes produced by two genuine candlestick bodies that make the same low. In other cases, the bottom shadows of two close candles intersect at the same price level, and the stock rises. Another scenario is that one day’s lower shadow and the true body of a nearby session both hit the same bottom level.

The tweezers 1
The tweezers 2

6. Stick Sandwich

sandwitch

It happens during a downtrend, and the candles that follow the Pattern must confirm it.

  • The First Candle is black and has a short Lower Shadow (or none at all), indicating a new Low in the Downtrend.
  • The Second Candle is white, with the Open placed above the First Candle’s Close (The Real Body is above the close of the First Candle).
  • The Third Candle is black, with its Open above the Second Candle’s Close and its Close at the same level (more or less) than the First Candle’s Close (So that it fully contains the Real Body of the Second Candle).
sandwitch 1

It happens during an uptrend, and the candles that follow the Pattern must confirm it.

  • The First Candle is white, with a short Upper Shadow (or no Upper Shadow), and it symbolizes a new Uptrend High.
  • The Close of the Second Candle is below the Open of the First Candle (The Real Body is below the Close of the First Candle).
  • The Third Candle is white, and its Open is below the Second Candle’s Close, but its Close is at the same level (more or less) as the First Candle’s Close (So that it fully contains the Real Body of the Second Candle).

7. Dumpling top pattern

Dumpling top pattern

Normally it should be a signal of Bearish reversal of the current Trend.

  • It happens during an uptrend, and the candles that follow the Pattern must confirm it.
  • The Pattern begins in an Uptrend, then becomes a “Sideways” Trend (representing Market hesitation); at the end of the Pattern, the Trend reverses course and becomes a Downtrend.

– This Pattern is relatively uncommon; it is critical that there is a Gap Down after the “Sideways” Trend and right before the Downtrend begins (To obtain a further confirmation of the reversal of the Trend, as the Pattern suggests).

Dumpling top pattern1

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8. Fry pan bottom pattern

Fry pan bottom pattern
  • It should normally be an indication of a bullish reversal of the present trend.
  • It happens during a downtrend, and the candles that follow the Pattern must confirm it.
  • The Pattern begins as a Downtrend, then transforms into a “Sideways” Trend (which symbolizes Market hesitation); near the end of the Pattern, the Trend reverses course and becomes an Uptrend.

– This Pattern is relatively uncommon; it is critical that there is a gap up after the “Sideways” Trend and immediately before the Uptrend begins (To obtain a further confirmation of the reversal of the Trend, as the Pattern suggests).

Fry pan bottom pattern 1

9. Tower top pattern

Tower top pattern

It happens during an uptrend, and the candles that follow the Pattern must confirm it.

  • The First Candle is a long, white candle.
  • The following Candles in the “Sideways” Phase are Spinning Tops (Black or White), which represent the Market’s uncertainty.
  • The Last Candle is lengthy and dark, signaling the commencement of the current Trend’s reversal.
Tower top pattern 11

10. Tower bottom pattern

Tower bottom pattern

It happens during a downtrend, and the candles that follow the Pattern must confirm it.

  • The First Candle is a long, black candle.
  • The following Candles in the “Sideways” Phase are Spinning Tops (Black or White), which represent the Market’s uncertainty.
  • The Last Candle is long and white, signaling the commencement of the current Trend’s reversal.
Tower bottom pattern 1

11. Mat Hold pattern

Mat Hold pattern
Mat Hold pattern 1

It occurs during an Uptrend; confirmation is required by the candles that follow the Pattern.

  • The First Candle is a long, white candle.
  • Between the First and Second Candles, there is a Gap Up.
  • The Second Candle is black, with a short Real Body and a Close that is higher than the First Candle’s.
  • The Third Candle’s Real Body can be white or black (it doesn’t matter), but it is short.
  • The Fourth Candle has a short Real Body and is black.
  • Prices are falling in the Second, Third, and Fourth Candles, and their Real Bodies are higher than the First Candle’s Low.
  • The Fifth Candle is white and lengthy, with the Close over the Second Candle’s High.
bearishn mat
bearish mat

It occurs during a Downtrend; confirmation is required by the candles that follow the Pattern.

  • The First Candle is a long, black candle.
  • Between the First and Second Candles, there is a Gap.
  • The Second Candle is white, with a short Real Body and a Close that is lower than the First Candle’s.
  • The Third Candle’s Real Body can be white or black (it doesn’t matter), but it is short.
  • The Fourth Candle has a short Real Body and is white.
  • Prices are rising in the Second, Third, and Fourth Candles, and their Real Bodies are below the First Candle’s High.
  • The Fifth Candle is dark and lengthy, with the Close below the Second Candle’s Low.

12. Abandoned baby pattern

Abandoned baby pattern
  • It occurs during a downtrend; the candles that follow the Pattern do not need to confirm the Pattern (but it is better if you do).
  • The First Candle is a long, black candle.
  • The Second Candle is a Doji Candle that has a gap between it and the Previous Candle.
  • The Open is above the Second Candle on the Third Candle, which is long and white.

14. Tri star doji

Tri star doji

It happens during a downtrend, and the candles that follow the Pattern must confirm it.

  • The Second Doji Candle is located beneath the previous Two Doji Candles.

References : Books | Wikipedia

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