This is the 4th video of Technical Analysis for Cryptocurrencies. In this video, you will learn candles chart patterns which are important to know before making a technical analysis of any market.
CANDLESTICK CHART PATTERNS
Different types of candlestick patterns are created due to fluctuations in prices. These patterns are formed due to different trends in the prices and indicate the direction of prices. These patterns have been used for ages to predict the price direction. Price movements are easily analyzed by traders using these different patterns.
Some of the notable candlestick patterns are:
- Doji pattern
- Marubozu pattern
- Hammer pattern-Bearish reversal
- Bullish reversal pattern-inverted hammer
DOJI PATTERN
This pattern is formed when the opening and closing prices and rates of the market are roughly or almost completely the same. This pattern shows that no matter what the movement of price has been at a certain time at the end of the day buyers and sellers have completely neutralised the other. A single Doji pattern cannot tell much but when it is used concerning others it can reveal a lot and is thus helpful. Usually, the Doji pattern has a very thin body. Whenever the opening and closing prices are the same or are almost close to the other this pattern is formed. The length of shadows in this pattern can be different.
There are different types of Doji patterns also, these types have different shapes and are named as:
Gravestone Doji has a long shadow over the body. This pattern is similar in shape to a gravestone and hence named gravestone Doji. This pattern is formed whenever the opening and closing rates are at a low period.
When the opening and closing prices are at the high of the period Dragonfly Doji is created. In this pattern, the shadow is lower and it indicates the reversal in an uptrend.
Long-legged Doji has a long shadow on both sides. This pattern shows the indecision on both buyers’ and sellers’ sides. This pattern is formed when there is the same closing and opening price.
- Marubozu pattern
Marubozu is a Japanese term and it means a ‘bald or shaved head’. As the name indicates this pattern does not have any wick or shadow. This pattern is created when both opening and closing prices are the same as the maximum candle prices. Marubozu pattern candles are very strong and can be showing either trend reversal or trend continuation. This candlestick pattern also indicates that the markets opened at higher stock prices and closed at lower stock prices or the opposite of it. This pattern can help predict the stock direction in the future and traders can easily analyze the stock future through this pattern. Because this pattern is always missing shadow, therefore, it is easier to identify it.
- Hammer pattern[quads id=3]
The hammer candlestick pattern is formed whenever there is a greater lower closing trend than that of the opening prices. This pattern is usually formed after a significant decrease in prices Typically, this pattern has a small body and a long lower shadow. This pattern is indicative of the fact that the seller has entered the market when there was a decline in the price thus referring to that the market is trying to decide on a lower point. As it is evident from the name of the pattern this pattern is usually in hammer shape and the lower shadow of the pattern is almost twice the body size. This pattern does not suggest that there is an upside price reversal.
- Inverted hammer pattern
It is evident from the name itself that this pattern is exactly the opposite of the hammer pattern and the shape of it is as of an upside-down hammer. This pattern is formed typically after a downtrend and indicates that there is a trend reversal. When this pattern is shown in an uptrend then it is called a shooting star pattern also. As this pattern is at the bottom of the downtrend hence it can indicate the bullish-reversal also. Inverted hammer pattern has a long upper shadow and a short lower shadow it also has a small body. This pattern is also formed when buyers would push to increase securities’ prices. This trend as explained earlier is formed when the bullish traders begin getting confidence, hence the term bullish reversal also.
