WHAT IS CANDLESTICK?
Japanese candlesticks are shaped utilizing the open, high, low and close of the chosen time-frame.
– If the shut is above the open, we will say that the candlestick is bullish which signifies that the market is rising in this time period. Bullish candlesticks are at all times displayed as white candlestick.
Probably the most buying and selling platform use white shade to confer with bullish candlesticks. However the shade doesn’t matter, you should utilize no matter shade you need.
A very powerful is the open worth and the shut worth.
– If the shut is beneath the open, we will say that the candlestick is bearish which signifies that the market is falling on this session. Bearish candles are at all times displayed as black candlesticks. However this isn’t a rule.
Yow will discover totally different colors used to distinguish between bullish and bearish candlesticks.
– The stuffed a part of the candlestick is known as the actual physique.
–The skinny traces poking above and under the physique are known as shadows.
– The highest of the upper shadow is the excessive The underside of the lower shadow is the low.
CANDLESTICK BODY SIZES
Candlesticks have completely different physique sizes:
Long bodies check with sturdy buying or selling stress, if there’s a candlestick by which the shut is above the open with a long body, this means that buyers are stronger and they’re taking management of the market throughout this time period.
Conversely, if there’s a bearish candlestick by which the open is above the shut with a long body, because of this the selling stress controls the market throughout this chosen time-frame.
– Short and small bodies point out a bit buying or selling activity.
The higher and lower shadows give us essential details about the buying and selling session.
–Higher shadows signify the session excessive –Lower shadows signify the session low Candlesticks with long shadows present that buying and selling motion occurred nicely previous the open and close. Japanese candlesticks with short shadows point out that a lot of the buying and selling motion was confined close to the open and shut.
– If a candlestick has an extended higher shadow, and short lower shadow, which means consumers flexed their muscle tissues and bid worth greater.
However for one purpose or one other, sellers got here in and drove worth again down to finish the session again close to its open worth.
– If a Japanese candlestick has a protracted lower shadow and short higher shadow, which means sellers flashed their washboard abs and compelled worth lower. However for one purpose or one other purchaser got here in and drove costs again as much as finish the session again close to its’ open worth.
Candlestick patterns are one of the highly effective buying and selling ideas, they’re easy, straightforward to establish, and really worthwhile setups, a analysis has confirmed that candlestick patterns have a excessive predictive worth and might produce constructive outcomes.
I personally commerce candlestick sample for greater than 20 years; i can’t actually swap to a different methodology, as a result of i attempted 1000’s of methods and buying and selling strategies with no outcomes.
I’m not going to introduce you to a holy grail, this buying and selling system works, however be ready to lose some trades, shedding is part of this recreation, in case you are on the lookout for a 100% wining system, i extremely advocate you to cease buying and selling and go search for one other enterprise.
Candlestick patterns are the language of the market, think about you’re residing in another country, and also you don’t communicate the language.
How may you reside when you can’t even say a phrase? It’s powerful proper??? The identical factor in terms of buying and selling.
If you know the way to learn candlestick patterns the proper method, it is possible for you to to grasp what these patterns inform you concerning the market dynamics and the dealer’s habits.
This ability will make it easier to higher enter and exit the market in the proper time. In different phrases, it will make it easier to act in a different way out there and earn a living following the sensible man’s footprints.
The candlestick patterns that i’m going to point out you listed here are an important patterns that you’ll discover out there, on this chapter, i’m not going to point out you methods to commerce them, as a result of this will probably be defined in particulars within the subsequent chapters.
What i would like you to do is to concentrate on the anatomy of the sample and the psychology behind its formation, as a result of it will make it easier to get the ability of figuring out simply any sample you discover out there and perceive what it tells you to do subsequent.
If you may get this ability, you can be prepared to grasp and grasp the buying and selling methods and ways that i’m going to show you within the subsequent chapters.
THE ENGULFING CANDLESTICK PATTERN
The Engulfing bar because it states in its title is shaped when it absolutely engulfs the earlier candle. The engulfing bar can engulf a couple of earlier candle, however to be thought-about an engulfing bar, no less than one candle have to be absolutely consumed.
The bearish engulfing is among the most essential candlestick patterns.
This candlestick sample consists of two bodies:
The primary body is smaller than the second, in different phrases, the second body engulfs the earlier one. See the illustration beneath:
That is how a bearish engulfing bar sample appears like in your charts, this candlestick sample provides us invaluable details about bulls and bears available in the market.
In case of a bearish engulfing bar, this sample tells us that sellers are accountable for the market.
When this sample happens on the finish of an uptrend, this means that buyers are engulfed by sellers which alerts a development reversal.
See the instance beneath:
As you’ll be able to see when this price motion sample happens in an uptrend, we are able to anticipate a trend reversal as a result of buyers aren’t nonetheless accountable for the market, and sellers try to push the market to go down.
You possibly can’t trade any bearish candlestick sample you discover in your chart; you will have different technical instruments to verify your entries.
We are going to discuss this in particulars within the subsequent chapters. Proper now, i simply need you to open your charts and attempt to determine all bearish candlestick patterns that you simply discover.
The bullish engulfing bar pattern
The bullish engulfing bar consists of two candlesticks, the first is the small body, and the second is the engulfing candle,
The bullish engulfing bar pattern tells us that the market is no longer under the control of sellers, and Buyers will take control of the market.
See the following example:
When a bullish engulfing candle forms in the context of an uptrend indicates a continuation signal.
When a bullish engulfing candle forms at the end of a downtrend, the reversal is much more powerful since it represents a capitulation bottom.
The example above clearly shows us how the market works. changes direction after bullish formation engulfing bar pattern.
The smallest body representing sales power was covered by the second body representing the purchasing power.
The color of the bodies is not important. What is important is that the smallest is fully wrapped by the second candlestick.
Do not try to trade in the market using this price action alone, because you will need other factors confluence to decide if the pattern is worth trade or not I will talk about this in the next chapters
What I want you to do now is get the ability to identify a bearish and bullish engulfing bar on your charts. This is the most important step to the moment.