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12 Popular Candlestick Patterns Used in Technical Analysis

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12 Popular Candlestick Patterns Used in Technical Analysis

Introduction

Candlestick charts are one of the most commonly used technical tools to analyze price patterns. They have been used by traders and investors for centuries to find patterns that may indicate where the price is headed. This article will cover some of the most well-known candlestick patterns with illustrated examples.

12 Popular Candlestick Patterns Used in Technical Analysis

How to use candlestick patterns

There are countless candlestick patterns that traders can use to identify areas of interest on a chart. These can be used for day trading, swing trading, and even longer-term position trading. While some candlestick patterns may provide insights into the balance between buyers and sellers, others may indicate a reversal, continuation, or indecision.

Its important to note that candlestick patterns arent necessarily a buy or sell signal by themselves. They are instead a way to look at market structure and a potential indication of an upcoming opportunity. As such, it is always useful to look at patterns in context. This can be the context of the technical pattern on the chart, but also the broadermarket environment and other factors.

In short, like any other market analysis tool, candlestick patterns are most useful when used in combination with other techniques. These may include theWyckoff Method, theElliott Wave Theory and theDow Theory. It can also includetechnical analysis (TA) indicators, such asTrend Lines,Moving Averages, theRelative Strength Index (RSI),Stochastic RSI,Bollinger Bands,Ichimoku Clouds,Parabolic SAR, or theMACD.

Bullish reversal patterns

Hammer

A candlestick with a long lowerwick at the bottom of a downtrend, where the lower wick is at least twice the size of the body.

A hammer shows that even though the selling pressure was high, the bulls drove the price back up close to the open. A hammer can be either red or green, but green hammers may indicate a stronger bull reaction.

12 Popular Candlestick Patterns Used in Technical Analysis

Inverted hammer

Also called the inverse hammer, its just like a hammer, but with a long wick above the body rather than below. Similar to a hammer, the upper wick should be at least twice the size of the body.

An inverted hammer occurs at the bottom of a downtrend and may indicate a potential reversal upward. The upper wick shows that price stopped its continued downward movement, even though the sellers eventually managed to drive it down near the open. As such, the inverted hammer may suggest that buyers soon might gain control of the market.

12 Popular Candlestick Patterns Used in Technical Analysis

Three white soldiers

The three white soldiers pattern consists of three consecutive green candlesticks that all open within the previous candles body, and close at a level exceeding the previous candles high.

Ideally, these candlesticks shouldnt have long lower wicks, indicating that continuous buying pressure is driving the price up. The size of the candles and the length of the wicks can be used to judge the chances of continuation or a possible retracement.

12 Popular Candlestick Patterns Used in Technical Analysis

Bullish harami

A bullish harami is a long red candle followed by a smaller green candle thats entirely contained within the body of the previous candle.

The bullish harami can unfold over two or more days, and its a pattern indicating that selling momentum is slowing down and might be coming to an end.

12 Popular Candlestick Patterns Used in Technical Analysis

Bearish reversal patterns

Hanging man

The hanging man is the bearish equivalent of a hammer. It typically forms at the end of an uptrend with a small body and a long lower wick.

The lower wick indicates that there was a large sell-off, but bulls managed to take back control and drive the price up. Keeping that in mind, after a prolonged uptrend, the sell-off may act as a warning that the bulls might soon be losing control of the market.

12 Popular Candlestick Patterns Used in Technical Analysis

Shooting star

The shooting star is made of a candlestick with a long upper wick, little or no lower wick, and a small body, ideally near the low. The shooting star is a similar shape as the inverted hammer but is formed at the end of an uptrend.

It indicates that the market reached a high, but then sellers took control and drove the price back down. Some traders prefer to wait for the next few candlesticks to unfold for confirmation of the pattern.

12 Popular Candlestick Patterns Used in Technical Analysis

Three black crows

The three black crows are made of three consecutive red candlesticks that open within the previous candles body, and close at a level below the previous candles low.

The bearish equivalent of three white soldiers. Ideally, these candlesticks shouldnt have long higher wicks, indicating continuous selling pressure driving the price down. The size of the candles and the length of the wicks can be used to judge the chances of continuation.

12 Popular Candlestick Patterns Used in Technical Analysis

Bearish harami

The bearish harami is a long green candle followed by a small red candle with a body thats entirely contained within the body of the previous candle.

The bearish harami can unfold over two or more days, appears at the end of an uptrend, and may indicate that buying pressure is decreasing.

12 Popular Candlestick Patterns Used in Technical Analysis

Dark cloud cover

The dark cloud cover pattern consists of a red candle that opens above the close of the previous green candle but then closes below the midpoint of that candle.

It can often be accompanied by highvolume, indicating that momentum might be shifting from the upside to the downside. Traders might wait for a third red candle for confirmation of the pattern.

12 Popular Candlestick Patterns Used in Technical Analysis

Continuation patterns

Rising three methods

This pattern occurs in an uptrend, where three consecutive red candles with small bodies are followed by the continuation of the uptrend. Ideally, the red candles shouldnt breach the range of the preceding candlestick.

The continuation is confirmed with a green candle with a large body, indicating that bulls are back in control of the trends direction.

12 Popular Candlestick Patterns Used in Technical Analysis

Falling three methods

The inverse of rising three methods, indicating the continuation of a downtrend instead.

12 Popular Candlestick Patterns Used in Technical Analysis

Doji

A Doji forms when the open and the close are the same (or very close to each other). The price can move above and below the open but eventually closes at or near the open. As such, a Doji may indicate an indecision point between buying and selling forces. Still, the interpretation of a Doji is highly dependent on context.

Depending on where the line of the open/close falls, a Doji can be described as:

Gravestone Doji Bearish reversal candle with a long upper wick and the open/close near the low.

12 Popular Candlestick Patterns Used in Technical Analysis

Long-legged Doji Indecisive candle with both a lower and upper wick, and the open/close near the midpoint.

12 Popular Candlestick Patterns Used in Technical Analysis

Dragonfly Doji Either bullish or bearish candle (depending on context) with a long lower wick and the open/close near the high.

12 Popular Candlestick Patterns Used in Technical Analysis

According to the original definition of the Doji, the open and close should be exactly the same. But, what if the open and close arent the same but are instead very close to each other? Thats called a spinning top. However, since cryptocurrency markets can be very volatile, an exact Doji is rare. As such, the spinning top is often used interchangeably with the Doji.

Candlestick patterns based on price gaps

There are many candlestick patterns that use price gaps. A price gap is formed when a financial asset opens above or below its previous closing price, which creates a gap between the two candlesticks. Since cryptocurrency markets trade round the clock, patterns based on these types of price gaps are not present. Even so, price gaps can still occur inilliquid markets. However, since they happen mainly because of low liquidity and highbid-ask spreads, they might not be useful as actionable patterns.

Closing thoughts

Candlestick patterns are essential for any trader to at least be familiar with, even if they dont directly incorporate them into their trading strategy.

While they can be undoubtedly useful to analyze the markets, its important to remember that they arent based on any scientific principles or laws. They instead convey and visualize the buying and selling forces that ultimately drive the markets.

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When will Bitcoin Rally Start? Technical Analysis:

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When will Bitcoin Rally Start? Technical Analysis:

Bitcoin dropped today after briefly kissing the $59900 and as the selling pressure rose it dropped swiftly and the slump continues. The question is when will the Bitcoin rally start?

When will Bitcoin Rally Start? Technical Analysis:

TradingView Bitcoin Chart

Bitcoin Rally: Technical Analysis

The Bitcoin price today is $54,346.67 USD with a 24-hour trading volume of $42,612,427,726 USD. Bitcoin is down 7.79% in the last 24 hours. The current CoinMarketCap ranking is #1, with market cap of $1,026,280,520,107 USD. It has a circulating supply of 18,883,962 BTC coins and a max. supply of 21,000,000 BTC coins.

Bitcoin has found its support at fib -0.65 and has an increased volatility today. Bitcoin is currently trading below EMA 20 on an hourly chart which indicates that the Bearish trend is volatile. The relative strength indicator shows that Bitcoin has entered an oversold situation. This means that now it should start getting the buyers in and the price should rise to the previous highs of yesterday.

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Bitcoin

Nike to bring Sneakerheads to Metaverse?

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Nike to bring Sneakerheads to Metaverse?

Reading this article, most of you if wearing shoes there are chances you are Nike shows. Nike is a leading shoe brand running successfully. NIKE, Inc. engages in the design, development, marketing, and sale of athletic footwear, apparel, accessories, and equipment; but hold on there is more coming in.

Nike to bring Sneakerheads to Metaverse?

For the fiscal year May 2021, Nike Business was up 19% which is worth $44.5 billion profit for a year with a market capitalization of $275.7 billion.

Nike to bring Sneakerheads to Metaverse?

Nike is a real-world one of the most successful brands which now has decided to step into the virtual world of cryptocurrency and metaverse. With the Facebook announcement of Meta, many other brands have gathered the courage to test their abilities in the virtual universe. We have already covered an article on Metaverse. In this virtual universe, you are free to be anyone do anything, and experience anything while you sit on a sofa in your home. You’ll have to buy the assets in this virtual world like in real – and this confirms that yes you’ll find your favorite pair of Nike Shoes in the Metaverse.

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How can Stop Loss save your day

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How can Stop Loss save your day

The cryptocurrency world is notorious for the insane volatilities and traders are liquidated every time there are major spikes. No matter which way the price moves, they are always people betting against the flow.

Even if you have opened a safe position, the volatility still can kill your profits and turn your portfolio to half or below, that’s why using a stop is mandatory.

A stop loss is an auto trade call that a trader sets to avoid more losses in case the market does not move in the desired direction. For example, If you opened a long position of Bitcoin at $60,000 and you think it will rise to $65,000 or $70,000. But the unfortunate happens and Bitcoin starts to drift downwards. Now you will have to decide how much loss you can face and exit the trade. So, you exited the trade at $59,500 and then Bitcoin dropped to $55,000, you saved plenty of loss. Now from here, you can again open your long position by putting another stop loss below. This has not saved your losses but you were able to open a long position at a better price.

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