Candlestick patterns are an important tool in technical trading. Knowing them allows traders to interpret possible market trends and make decisions from those inferences. There are various types of candlestick patterns that can signal bullish or bearish movements. This article will briefly explain what candlestick patterns are and cover the top 10 patterns that all traders should know in order to easily trade the markets.
What is a Candlestick Pattern?
A candlestick is a single bar that represents the price movement of a specific asset for a specific time period. The information it displays includes the open, high, low and close prices for the time period.
Candlestick patterns take into account one or more candlesticks to help technical traders in formulating inferences about future movements and price patterns of an underlying asset. These are displayed graphically on a chart for market analysis. Our guide to reading candlestick charts is a great place to start learning how to interpret candlestick trading.
Candlestick Patterns Can Be Bullish or Bearish
In order to identify the most commonly used candlestick patterns and apply them to a trading strategy, traders need to understand how the tendencies of these patterns affect market direction (trend). The table below summarizes the two main categories of price movement that candlesticks can indicate. Many of these patterns appear in our top 10 list below.
Bullish candlestick pattern:
Bearish candlestick pattern:
In particular, the candlestick pattern does not mean that it must be reversed, bullish or bearish