Candlestick Patterns
Candlestick patterns are the most common and reliable types of charts and have been in use for hundreds of years. Many investors find that Japanese candlesticks charts are more visually appealing than line or bar charts and they convey the price information in a manner that makes them easier and quicker to read than other types of charts. Investors who use technical analysis to analyze stocks often use candlestick patterns because they can more easily determine if the closing price was higher or lower than the opening price then with bar or line charts. Not only do candlestick charts show the opening and the closing prices of stock but they also show the highs and lows. Through analysis of these charts investors can easily see how those prices relate to early prices and if those prices tend to go up indicating a bull market or if they tend to go down indicating a bear market. Additionally, investors use candlestick charts in order to fully understand market sentiment whereas bar charts often only signify market noise that cannot be easily interpreted. For those interested in utilizing candlestick charts there are 12 major patterns that they must learn first. Through learning about the 12 main patterns investors will become familiar with the concept of reversal patterns as well as the bullish and bearish patterns that are easily identifiable. 

When identifying candlestick patterns it is important for investors to note that a reversal does not always mean that the current trend (uptrend or downtrend) will reverse direction, but that the current direction may just be ending, or possibly going sideways. These patterns must be viewed within the context of the prior activity in order to be effective and they may have different meanings depending upon where they occur within the context of prior trends and formations.

After learning the 12 major candlestick patterns, such as the hanging man candle, the bullish engulfing pattern, and the evening star candlestick, investors can then move on to learning about the “secondary signals” such as the three black crows, the three white soldiers, and others. These secondary signals do not appear as frequently as the major signals but they provide additional opportunities needed when making important trading decisions.

In addition to using candlestick patterns, you should also use other forms of technical analysis in conjunction with candlestick analysis. Moving averages for instance are technical indicators used in technical analysis that you can learn about throughout this site. You can learn about the different types of moving averages as well as the moving average crossover. 

Continue your Japanese candlesticks education and learn about the secondary candlesticks signals below!

Three Black Crows
Three Identical Crows
Two Crows
Meeting Lines
Belt Hold
Three River Bottom
Three Inside Up
Three Inside Down
Three White Soldiers
Concealing Baby Swallow
Stick Sandwich
Homing Pigeon
Ladder Bottom