What is Candle stick Patterns and How to Read It

Understanding Candle stick Patterns and How to Read It

One way to make a profit when trading crypto is to understand candle stick patterns. Although this method is not the only way to win trades. This candlestick pattern is so diverse. So, you need to be observant to learn them one by one.

Maybe you've seen patterns of one bar, two bar, or three candle sticks. Of all the options available, in fact not all candlestick patterns are profitable. Therefore, it is important to recognize examples of candlestick patterns that are useful for trading.

Understanding Candlesticks

Candlestick is an ancient diagramming method from the land of sakura whose accuracy is unquestionable. This charting technique has been used for a long time, it is even more popular among traders today.

If you pay attention, candlesticks will reflect the impact of investor sentiment on security prices. Usually, this kind of analysis is done to determine the right time to enter and exit trades.

This method is a smart strategy for trading several financial assets, namely stocks, cryptocurrencies, and foreign exchange. But keep in mind that the use of candlesticks is included in the category of discretional analysis methods.

That is, this analysis relies on the trader's subjective intuition to understand patterns. The patterns on the chart will be executed through actual trades. This method will produce consistent profits if coupled with experience and high flying hours.

How to Read Candlestick Patterns

Candlesticks have various types of patterns and some of them are profitable. These favorable patterns generally follow the systematics of technical analysis. Candlesticks have two alert levels to understand, namely “signal” and “confirmation”.

One of the standby abbreviations will indicate an up or down movement. But traders do not have to be prepared by placing a position in advance for a "signal".

As for "confirmation", it means that traders can place positions according to the direction of movement of the displayed pattern. Then, how to read the correct candlestick in order to know how it moves?

Basically, you can read this charting method by getting to know three types of profitable candlestick patterns. This can be seen from the “confirmation” alert level for position opening. Instead of being curious, here are some profitable candlestick patterns that can be understood.

1. Pin Bar Pattern

Well, the pattern that most often appears on the chart is the pin bar. By naked eye, this pattern is indeed the most easily recognizable. If you pay attention, the pin bar has a longer shadow length than the body and nose (opposite tip).

The more the difference, the indication of the possibility of continuing a reversal or trend will increase.

This type of candlestick appears because of market sentiment which previously moved in one direction, then reversed itself. No wonder the movement produces a long shadow trail.

2. Inside Bar Pattern

The next profitable candle stick pattern is called the inside bar. No less like a pin bar, this one pattern also often reaches the highest and lowest trends. The inside bar pattern represents two bar charts. Usually one is smaller than the range mother bar.

Basically, this pattern reflects the process of consolidation between sellers and buyers. That is, the two parties are still tugging and dancing until a new trend is formed. Over time, the engulfing pattern is now also included in the inside bar category.

3. Three Outside Up and Three Outside Down Pattern

Basically this one pattern is also a development of the inside bar pattern type. But you can see the difference in the size of the second candlestick. The first candle is generally smaller or inclined inward than the second candle.

This could indicate a growing pressure of sellers and buyers. While the winner of the mutual show of strength is confirmed on the bar in third place.

This three outside up pattern indicates that there will be a bearish reversal or a price reversal that previously went up and down. While the three outside down pattern indicates the opposite opportunity, namely a bullish reversal or a price reversal that goes down to go up.

4. Evening and Morning Star Pattern

The next candlestick pattern to understand is the evening star and morning star. Well, this candlestick pattern indicates the doubts that exist among market participants. The candlestick when it confirms the occurrence of this by showing a bow in the next direction.

Evening star pattern refers to an indication of a bearish reversal, while the morning star pattern indicates the opposite (bullish reversal).

5. Multi-Bar Reversal Pattern

This pattern is also known as the falling and rising three methods. Most of these patterns have multiple bars in one formation. No wonder you will find the occurrence rate is getting less and less.

Not only that, the accuracy of trading signals from this one candlestick pattern is indeed higher. However, the number of stems that appear tends to be less. This candlestick pattern is indeed profitable and has special characteristics in the three bars in the middle.

However, that display was later countered by his final bar piece. No wonder the closing price on the last candle determines the accuracy of this one pattern. Then, how is the price reversal in these two patterns?

In the pattern of falling three methods, tends to be a bullish reversal, i.e. price reversal decreases to increase. While the pattern of rising three methods, there is a long (buy) position that can be seen after the first bar.

By understanding candlestick patterns, it can be a provision for novice traders to invest. Both in the form of crypto investment, stocks, and foreign exchange. Be sure to recognize each pattern well and the indications that occur within it.

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