Candlesticks

What timeframe suites you?

● Scalpers: Scalpers take quick entry and exit, trying to catch quick movementum of
the market, if you are such a trader then you can use 1 min and 3 min candlestick
timeframe.
● Intraday traders: These traders buy and sell on the same day, these traders use 5
min and 15 min timeframes.
● Swing Trading: Swing traders hold positions for several days or weeks to profit from
price swings within a larger trend. 30 min and 1 hr time frames provide a broader
perspective while still capturing shorter-term movements.
● Position Trading: Position traders hold positions for weeks, months, or even years,
focusing on long-term trends. 4-hour and daily time frames offer a more extended
view of the market and are suited for traders who want to avoid frequent trading.
● Investing: Long-term investors typically use weekly or monthly charts to analyze
markets and make investment decisions. These time frames filter out short-term
noise and focus on long-term trends.
 Candlesticks
If you want to understand the price movements on charts, then
understanding candlesticks are really important. A candlestick shows the
open, high, low and close of an underlying asset in a given timeframe. The
difference between the open and close is the ‘body’ of the candlestick and
the lines above/below the candle are called ‘wicks’.
Now, if the close of the asset in question is higher than the open, the body
of the candle is green. A red candle signifies that the close is lower than the
open. The high and low of a candlestick is represented by the tip of the
wicks. Throw a couple of candlesticks together and you have a candlestick
pattern.
Basics of a Candlestick
Candlesticks in different Timeframes
Candlestick
Patterns
 DOJI
A doji is formed when the opening and
closing prices of the security are nearly the
same, as a result of which the body of the
candle becomes insignificantly small.
The formation of a doji candlestick pattern in
technical analysis reflects market indecision
and a balance between buyers and sellers,
often indicating a potential trend reversal or
significant price consolidation.
Doji in isolation doesn’t give sufficient
information to base a trade.
TYPES OF DOJI CANDLESTICKS
 Morning Star
Morning Star is a three candlestick
pattern, where the first candle is red,
usually towards the end of a downtrend.
The third candle confirms the reversal by
opening higher than the previous candle.
The star here is the middle candle, which
can either be red or green, showing
indecision in the market. We can see that
selling pressure has diminished and the
buyers are getting stronger. Identifying
that shift in market sentiment can help
you place more well-informed trades.
 Evening Star
Evening Star is also a three candlestick
pattern, where the first candle is green,
usually towards the end of a uptrend.
The third candle confirms the reversal by
opening lower than the previous candle.
The star here is the middle candle, which
can either be red or green, showing
indecision in the market. We can see that
buying pressure has diminished and the
sellers are getting stronger. Identifying
that shift in market sentiment can help
you place more well-informed trades.
 Hammer & Inverted Hammer
Hammer candlesticks get their name from the (quite
obvious) reason that they simply look like hammers.
For stronger bias,confirm that the size of the wick is almost
twice the length of the body.
The formation suggests a potential trend reversal as buyers
regain control after a period of selling pressure (downtrend),
reflecting a psychological shift towards bullish sentiment in
the market.

Inverted Hammer is an upside-down hammer, the upper

wick is typically almost twice as long as the body, with little
to no lower wick.
Inverted hammers indicate a bullish trend reversal from a
downtrend. What happens is that during the downtrend,
where sellers pose a high threat, buyers push back.
This battle of domination leads to a long upper wick if the
bears start to lose control, indicating an uptrend in the next
candle.
HAMMER
INVERTED HAMMER
 HANGING MAN
A hanging man is a single-candlestick
bearish pattern, with a small body with
little to no upper wick and a lower wick
nearly twice as long as the body.
The hanging man is typically found at
the end of an uptrend, which means you
need to buckle up for a trend reversal.
 Shooting Star
This candlestick has a small body at the
bottom and a long upper shadow,
resembling the tail of a comet.
A shooting star is a bearish candle with
a long upper shadow and little or no
lower shadow and a small body near
the low of the previous candle.
It usually appears after an uptrend/
price rise. The upper shadow is usually
about twice the size of the body.
Note: Regardless of whether the candle
is green or red, a shooting star signifies
a bearish candle when in an uptrend.
Shooting star vs Inverted Hammer
REVERSAL CANDLESTICKS
Bullish Engulfing
A bullish engulfing candle is formed
when a small bearish candle is
followed by a bullish candle that
opens at or lower than the previous
candle’s closing. However, the bullish
candle closes at a point higher than
the last candle’s opening, thereby
engulfing the bearish candle.
Irrespective of the size of the red
candle, the critical factor here is the
size of the green one.
Bearish Engulfing
A bearish engulfing candle is formed
when a small bullish candle is
followed by a bearish candle that
opens at or lower than the bullish
candle’s closing.
However, the bearish candle closes
at a point higher than the last
candle’s opening and, as a result,
engulfs the bullish candle.
Contrary to the bullish engulfing
candle, the critical factor in this
pattern is the size of the red candle.
BULLISH HARAMI
There are two candles in a bullish
harami. Think of the first candle as
the Mama candle, a long and bearish
candle.
The second candlestick, a bullish one,
is all cosied up next to the big bearish
candle.
That is the bullish harami in a
nutshell.
 Bearish Harami
This pattern consists of two candlesticks. The
first candlestick is larger and represents the
existing uptrend while the second
candlestick gaps down the mid-range of the
previous candle and is smaller and cozied up
within the body of the first one.
This pattern indicates that there is selling
pressure and acts as a warning sign that the
bears might be regaining strength
suggesting a potential reversal in the
market, from bullish to bearish.
RISING THREE METHODS
The rising three method pattern
appears during an upward trend and
retraces its steps throughout the course
of the following days. The market is now
experiencing a strong buy-side period,
and the pattern indicates that the trend
will probably continue in the near term.
The rising three method candlestick
pattern consists of five candles. The
first and fifth are usually represented
by the colour green. They are lengthy
bullish candlesticks. The second, third,
and fourth candlesticks are all red in
colour.
FALLING THREE METHODS
A bearish trend and a falling three
technique candlestick pattern show that
the bears are in control.
The pattern is produced when the bulls
start to gain the upper hand but are
unable to completely defeat the bears.
First, it halts the downward movement
of the price, as seen by the three brief
green candles.
The bears catch up to the bulls because
they can't keep up their speed for very
long. By closing below the level of the
first long candle, the long red candle at
the conclusion of the pattern completes
it.