If you flip the Hammer candlestick on its head, the result becomes the (aptly named) Inverted Hammer candlestick pattern. Like the Hammer, the Inverted Hammer occurs after a downtrend, and it also has one long shadow and one nonexistent (or very short) shadow. Plus, they’re both bullish reversal patterns formed with just one candle! The key to identifying a Hammer versus an Inverted Hammer is the location of the long shadow. A Hammer’s long shadow extends from the bottom of the body, while an Inverted Hammer’s long shadow projects from the top. To learn a little more about this common reversal pattern, please scroll down.
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Just because a signal is composed of only one candlestick, that doesn’t mean it can’t pack a big punch. Take the Hammer candlestick pattern. Formed of a small body and a long tail, the Hammer sends a strong message nevertheless. This bullish reversal pattern indicates that after a downtrend, the bears drove down the price until the bulls gained control. If it can be confirmed, it signifies that an uptrend is on the way. Let’s dig in a little further to help you better understand and identify this common trading signal . . .
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Perhaps the most macabre candlestick in name, the Hanging Man candlestick pattern is said to resemble a hanging man because of its short body and long shadow (which can look like dangling legs). Occurring after an uptrend, this bearish reversal pattern is composed of only one candlestick and it signifies that the prior uptrend is ending. Momentum is decreasing and the direction of the stock may soon be changing (this is especially likely if you can confirm the Hanging Man with decreasing prices the following day). Although identical to the Hammer candlestick in shape, the Hammer occurs at the end of a downtrend, while the Hanging Man sticks to uptrends.
When you see a Hanging Man, you’ve been warned: a price change may soon be on the way. To learn more about this reversal signal, please scroll down . . .
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If you’ve ever wished upon a star, I hope that that star was a Morning Star candlestick pattern. Unlike the Evening Star, an omen that hints at bad things to come (i.e., low stock prices), the Morning Star is a sign of good fortune. If you spot this bullish reversal signal, which is composed of three candles, you can expect stock prices to increase. Although the bears have been in control, the bulls are ready and able to take over. To learn how to spot the Morning Star signal, how to decipher its characteristics, and how to interpret its meaning, just scroll down.
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Japanese candlesticks come in a variety of shapes and sizes, and when you group these varying candlesticks together, you create useful patterns. Once you’re able to recognize, understand, and utilize these patterns, you can find success through candlestick charts. Although numerous candlestick patterns exist and all traders have their personal favorites, today we’re going to run through some of the most beloved and effective candlestick patterns. You can’t go wrong with these five patterns, especially if you’re able to combine them with other indicators. They are, quite simply, some of the best candlestick patterns around.
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When it comes to investing, would you rather be a wallflower, sitting at a table in the same club all night, or a party animal, bouncing from club to club and always out on the dance floor? In other words, do you want to be a long-term investor or a swing trader?
There are many different types of investing, including swing trading, scalp trading, day trading, and long-term investing, but your preferred method will depend on how you like to play the game. Do you want to stick with the same trade for years or even decades at a time? Or would you prefer to bounce from trade to trade, profiting from smaller swings in the market? How much time are you willing to devote to investing? Are you patient or restless? Do you like the “slow and steady” method or would you rather have quick and volatile relationships with your stocks? Today we’re focusing on just two methods, comparing swing trading vs. long-term investing, so that you can decide how you want to trade.
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Years ago (over a decade now), Rick Saddler, the creator of this very website, developed a swing trading strategy based around what he decided to call the “T-Line.” The T-Line is essentially the 8-day exponential moving average, or the 8 EMA. Although Saddler wasn’t the first trader to make good use of the 8 EMA, he did come up with a clever trading strategy to employ the 8 EMA for support (if there is buying pressure) and resistance (if there is selling pressure). Learning how to trade the T-Line is simpler than you might think, especially if you use the helpful tips we’ve compiled below.
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Last week we discussed the very basics of candlestick charts: what candlesticks look like, what their shape conveys, and how you can begin to understand them. Today we’d like to take that lesson one step further. Now that you can interpret a candlestick’s meaning, let’s talk about the various formations and patterns you’ll encounter in candlestick charts and what they suggest. Understanding candlestick charts (both the logistics and complexities) will take some time, so for now, we’re sticking with the basics. Let’s get started!
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You’ve lit dozens of candles over the years, I’ll bet: birthday candles on top of frosted cakes, scented candles to mask unpleasant odors, decorative candles during the holidays, and maybe even purely utilitarian candles when your electricity was out and you couldn’t find a flashlight. Picture the shape of a candle in your head. There’s the body, which is typically cylindrical in shape (boxy from the side), and there is a slender wick, which extends from the top. Keep that basic shape in mind, because today we’re learning how to read a candlestick chart.
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