CONTESTS

Chapter 1.

What is a candlestick chart? 3

Candlestick shapes: 6
Anatomy of a candle 6
Doji 7
Marubozo 8
Candlestick Patterns 9
Harami (bullish / bearish) 9
Hammer / Hanging Man 11
Inverted Hammer / Shooting Star 13
Engulfing (bullish/ bearish) 14
Morning Star / Evening Star 15
Three White Soldiers / Three Black Crows 16
Piercing Line / Dark Cloud Cover 17
Candle Stick Pattern Sheet 18
CHAPTER 2.

WHAT IS CHART PATTERN

TYPES OF CHART PATTERN
IMPORTANT CHART PATTERNS

CHAPTER 3.

HOW TO TRADE USING CHART PATTERN

RISK MANAGEMENT

2
 Chapter 1.
What is a candlestick chart?

Before I start to talk about candlestick patterns, I’d like to get right back
to basics on candles: what they are, what they look like, and why we use
them …

Drawing lines

When you look at a chart of market prices, you can usually choose from
line charts or candlestick charts.

A line chart will take its price levels from the opening or closing prices
according to the timeframe you have selected. So, if you’re looking at a
one-minute line chart of closing prices, it will plot the closing price for
each one-minute period – something like this …

Line charts can be useful for looking at the “bigger picture” and finding
long-term trends, but they simply cannot offer up the kind of information
contained in a candlestick chart.

Here is a one-minute candlestick chart for the same period …

3
 At first glance, it might look a little confusing, but I can assure you that
once you’re used to candlestick charts – you won’t look back.

Candlesticks are now such a familiar part of our trading scenery, it’s hard
to believe that only 20 years ago, they were a strange and mysterious
import from Japan.

Understanding the clues candles hold

One of the best things about the clues we find in candlesticks is that they
are visual and very intuitive to the trader.

Think you’re not intuitive? Well try this simple test …

Which of these patterns signals an up trend, and which signals a

downtrend?

1. Dark cloud cover

2. Morning star
3. Three black crows

If you answered “down”, “up”, “down” – you’d be absolutely right. And

you’ve just passed your first test in candlestick theory
With practice, reading candlesticks will become second nature – a quick
glance can give you confirmation to enter a trade you’re dithering over, or
it can tell you that now is the moment to exit and take profits.
Over the following pages, I want to show you how you can learn to spot these
patterns quickly and easily. I’ll also let you in on the patterns that are really
worth listening to – and the ones that can be unreliable and should be
approached with caution

4
 Candlestick Shapes

Basic candlestick anatomy

Whenever you look at a price chart, you will select a timeframe for that
chart – perhaps it’s a minute … or an hour … or a day.

Rather than simply plotting the open or close price for that time frame,
the candlestick gives you information about what went on during that
period of time …

Having all this extra information, gives you a heads-up about market
sentiment – and can offer invaluable clues about the way the market will
move.

5
The Doji

The Doji is a candlestick where the opening and closing prices are the
same (or almost the same). It can take many forms, as shown here,
depending on what the trading activity was in that period.

What’s key with a doji is that neither the bears nor the bulls have gained
control, and that the price has ended where it began. It’s a sign of
indecision in the market, and could (in conjunction with other indicators)
signal a change in market direction.

Applying doji candlesticks: a good trick is to look out for a doji near
the edge of a price channel (i.e., if a doji appears at the top of a channel
it could indicate a bearish correction.)

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The Marubozu

The text-book marubozu is a long candle, which implies that the day’s
trading range has been large. And it should have no upper or lower wick
(“marubozu” in Japanese means “shaved”).

A green (or white) marubozu signals strong conviction among buyers,

while a red (or black) marubozu indicates that sellers hare eager to flee.

In practice, when you’re looking at charts, a marubozu will often have a

short wick at the top or the bottom.

7
 Candlestick Patterns

Throughout this chapter, I’ve grouped candlestick patterns in pairs where

the patterns are very similar, except that one is bullish, and the other is
its flipside bearish pattern.

The Harami (Bullish & Bearish)

The harami is one of the most common candlestick patterns you’ll come
across, so it’s important to recognize it – to understand what it means,
and to understand its limitations.

A harami is a two-session reversal pattern – i.e. it’s made up of two

candlesticks and implies that the price is about to turn.

It is indicated by a small body of the opposite colour, completely

contained by the body of the previous session. It is not essential for the
two candles to be opposite colours, but this tends to give a more reliable
signal.

As you can see here, the body of the small black candle is completely
within the confines of the body of the previous white candle. This indicates
that the upward trend is running out of steam.

Here are a couple of examples:

This bullish harami shows the sellers beginning to

dominate as they come back into the market:

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 This bearish harami has a shadow that extends
beyond the body of the previous candle – some
traders wouldn’t regard this as a “true” harami.
However, it’s body is entirely within the previous
green candle, and a reversal follows:

I’ll be blunt with you – a harami doesn’t always live up to its hype. While
it is touted as a “reversal indicator” – you may find yourself disappointed
by its reliability.

The psychology behind a harami is that a possible change in sentiment

may be happening. The small candle does not necessarily mean a strong
reversal is coming. Often with a harami pattern, several days of tight
range trading, referred to as “congestion” or “consolidation,” will follow. A
harami on its own says “the chart MIGHT reverse.” It is best to look for
confirmation and to combine the harami with other longer-term patterns.

Be aware of haramis, and watch for what they are telling you about
market sentiment – but don’t have a blind faith in them.

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The Hammer (bullish) & The Hanging Man (bearish)

This is one of the best-known reversal indicators …

It is a candlestick pattern that consists of just one candle (although with

candlesticks it is always best to view them in context of the candlesticks
around them – in particular the candle that follows immediately after).

The hammer or hanging man candle has a long lower wick, short body,
and little or no upper wick. Strictly speaking, the lower wick should be at
least two times longer than the body – the longer, the better. And
depending on where you find it on a chart, it is called either a hammer or
a hanging man.

A hammer: is found in a downtrend, and signals a bullish reversal. The

long lower wick shows a period in which sellers where in control, but the
body shows buyers coming back in. From this we can tell that there is
strong buying by bulls as the period of sell-off declines.

As with all single candlestick patterns, we should wait for next candle to
confirm that buyers are in control.

Here’s a chart for Eur/USD. Note how the

strong selling action and increased volume
(indicated by the long lower wick) on the
candlestick is reversed as buyers come back
in, and that this coincides with an oversold
indicator on Stochastics. The green
candlestick opening above the body of the
hammer confirms the bullish trend.

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A hanging man: is the same shape as hammer, but found in an uptrend.
We don’t expect to see strong selling pressure (seen in the long lower
wick on the candle) in an uptrend, so here it suggests a change of market
sentiment and a reversal to downside.

Here’s an example from a FTSE 1-minute

chart.

In this case, the hanging man shape coincides

with the Stochastics showing the price to be
overbought, and the next candle confirms the
move.

There's no hard and fast rule about what colour a hammer or a hanging
man should be – the fact that they have a short body already means that
there's indecision coming into the market. However, a green (or white)
hammer and a red (or black hanging man) are stronger indicators.

(The chart above is quite a good illustration, because you’ll probably be

able to spot a couple of hammers on there, too – see what you can find!)

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Inverted Hammer (bullish) & Shooting Star (bearish)

This candlestick is, as you would expect – a hammer turned on its head …

It is a candle with a small body and long upward wick, signally a possible
reversal. Where it appears in a chart affects whether it’s an inverted
hammer or a shooting star.

An inverted hammer forms after a downtrend or

at the bottom of a period of consolidation. The
reversal isn’t confirmed until you have a bullish
candle in the next period.

A shooting star forms after an uptrend or at the top of

a period of consolidation.

Inverted hammers and shooting stars can have green or red bodies –
what’s important here is that the body size is small, that the upper wick is
at least twice the length of the body, and the lower wick is negligible.

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Engulfing (Bullish & Bearish)

An engulfing pattern signals a reversal, and can be bullish or bearish. It

comprises two candles. The body of the second must engulf the body of
the first, and must be the opposite colour to the first.

For a bullish engulfing candle, we have a smaller red

candlestick, followed by a green candlestick, the body of
which is greater in size that the previous candle.

For a bearish engulfing candle, the first candlestick is

smaller and green, followed by a red candlestick, the body
of which engulfs the previous candle.

In this example of a bearish engulfing pattern, we have

a clear uptrend, where the final candle has a red body,
which engulfs the body of the previous candle. This
suggests that strong selling pressure has come into the
market, and could indicate a reversal or period of
stagnation.

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Morning Star (Bullish) & Evening Star (Bearish)

The morning star and the evening star patterns are among the most
reliable candlestick signals. They are strong signals – rather like a
hammer or shooting star will bells on!

A morning star is a three-candle pattern, beginning with a

candle that is strongly down. The second candle’s real body
should be small and should not touch the prior candle’s real
body. The third candle should be strongly up.

An evening star is the same idea, just in reverse. Therefore,

its first candle is strongly up. Its second candle’s real body
should be small and should not touch the first candle’s real
body. And the third candle should be strongly down.

The small body of the star represents indecision by both the bulls and the
bears.

While the larger trend may be strongly up or strongly down, the presence
of the star indicates that the prevailing direction may have come under
profit taking or that the other side has actually taken control. Remember,
the previous bar should be a strong bar in the direction of the trend which
indicates that the bulls (in an up-trending market) or the bears (in a
down-trending market) are in control. This strength in direction is what
makes the appearance of the star that much more important as this
conviction has suddenly evaporated.

Here’s an example of a major turning point in the euro last year.

As you can see, we have a

strong upward candle, in the
direction of the trend, followed
by a gap up to a small candle,
showing indecision. The next
candle, moving strongly
downwards confirms the
morning star signal. And traders
who spotted this evening star
reversal signal will have enjoyed
a big downward swing.

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Three White Soldiers (Bullish)
& Three Black Crows (Bearish)

Here’s a great example of three black crows I spotted on the AUD/USD

chart …

Three long red (or black) candlesticks with lower and lower closes appear
within an upward trend (in this case, a rising triangle). They show
powerful selling action which strongly suggest that more selling is
imminent. And, as we see, the price continued downwards through long-
term support at 10536.

The flip-side to three black crows are three

white soldiers – three strong green (or white)
candlesticks within a downtrend. These are a
bullish signal of strong buying action at work.

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Piercing Line (Bullish) & Dark Cloud Cover (Bearish)

The piercing line and dark cloud cover are reversal signals similar to the
engulfing pattern except the second candlestick doesn’t completely engulf
the body of the first – it should close at least halfway into the real body of
the first.

A piercing line pattern occurs in a downtrend. A strong

red candlestick is followed by a candlestick that opens
below its close, which perpetuates the downtrend.
However, the price then moves up and closes above the
midpoint of the previous candle. This suggests to the
bears that a bottom could be forming.

Dark cloud cover occurs in an uptrend, when a red candle

opens above the previous candle’s closing price, but then
the price retreats to below the midpoint of the previous
candle.

As a reversal signal, these are not as strong as engulfing candles. The

further the close of the second candle cuts into the body of the first
candle, the more valid the signal. What piercing line and dark cloud cover
do offer traders is cause to pause – a minor top or bottom may be about
to form, or you may be entering a period of consolidation.

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Trader’s Bulletin Weekly: Candlestick Cheat Sheet
Basic candle shapes

Doji Reversal: a sign of Marubozo Continuation: a sign

market indecision that the trend is
maintaining
momentum

Bullish patterns Bearish patterns

Bullish Reversal indicated Bearish Small body of

Harami by small body of Harami opposite colour
opposite colour contained in body
entirely contained of previous session
in body of previous signals possible end
session. of uptrend.

Hammer Buyers have come Hanging Suggests that many

in – the downtrend Man longs have positions
may be about to they are trying to
reverse. sell – may indicate a
reversal.

Inverted The small body at Shooting Price gap followed

Hammer the bottom of the Star by small body to
trading range bottom of trading
should concern range suggests that
bears. Could form bulls are protecting
a “morning star”. their gains.

Bullish First candle Bearish Second candle

Engulfing reflects trend; Engulfing opens above the
second candle’s first but isfollowed
body engulfs size by a sell off that
of first candle’s engulfs body of first
body – a reversal is candle – the bears
indicated. are gaining ground.

Morning First candle is long Evening The small range of

Star and black; Star the second candle
second gaps suggests indecision,
below first’s close and the lower close
and trades in a of the third candle
small range; third confirms the bears.
is long and white.

Three Three long white Three Three consecutive

White sessions with Black sessions of selling
higher closes will worry bulls and
Soldiers each day – Crow may snowball into
powerful buying s a sell-off.
action is at work.

Piercing Long black Dark This pullback in

Line session is Cloud the second session
followed by will cause bulls to
opening at a new Cover question their
low, but closes stance.
above midpoint of
first session.
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 CHAPTER 2.

WHAT IS CHART PATTERN AND TYPES OF

CHART PATERN?

WITH CANDLES

22
TYPES OF CHART PATERN

WITH STRUCTURE

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What is chart pattern?
1. Chart patterns and trend lines are used in technical analysis to help identify
potential trading opportunities. Traders use them to recognize turning points
and strong reversals that could indicate buying or selling opportunities in the
market.

2. Trading patterns come in many shapes and sizes. Being common formations
that occur on a price chart, they can signal to traders that a certain price
action may take place. These patterns can help predict future price
movements.

3. Trend lines are a key component of technical analysis. They are used to
identify areas of support and resistance, indicate a prevailing market trend,
forecast potential price targets, and filter out noise prices. Trend lines can be
drawn using data points such as highs or lows on the chart. While drawing
one, it’s also crucial to track moving averages, identify particular market
conditions, and study the slope of the trend line. These trend lines help
traders identify entry/exit points in their trades as well as adjust their
positions based on future market movements. Ultimately, they give traders
better chances at spotting profitable trading opportunities in the markets.

Triangle Crypto Chart Patterns :-

One of the most common chart patterns is the triangle. There are three types of
triangles :-
1) Ascending
2) Descending
3) Symmetrical

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1) Ascending Triangle

An ascending triangle pattern is created when the price of an asset forms higher
highs and higher lows. This pattern signals that the price is likely to continue to
rise — so it gives a buy signal. Here are some common defining characteristics of
an ascending triangle:

 The price is forming higher highs and higher lows.

 There is horizontal resistance at a certain price level.
 The chart pattern is typically found in the middle of an uptrend

2) Descending triangle

A descending triangle is a bearish continuation pattern that, just like the name
suggests, is the opposite of the ascending triangle. It occurs when the asset price
forms lower highs and lower lows. A descending triangle usually gives a sell
signal as it is a sign that a bearish trend will probably continue. There are several
ways to identify a descending triangle. These are some of the things you can look
for.

 The asset price forms lower highs and lower lows.

 You can observe horizontal support.
 It is the middle of a downtrend

3) Symmetrical Triangle

A symmetrical triangle chart pattern emerges when the price of an asset forms
higher lows and lower highs. This chart pattern can be found at the end of a trend;
it signals that the price may reverse its course. The symmetrical triangle pattern
can be either bullish or bearish. Here are some signs that the pattern you’re
seeing might be a symmetrical triangle:

 The price forms higher lows and lower highs.

 There is no clear trend.
 It is the end of a trend

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HOW TO TAKE TRADE , SET TAKE PROFIT AND STOP LOSS
FOR ALL TYPES OF PATTERN
HERE IS THE FOLLOWING POINTS YOU NEED TO REMEMBER WHEN
YOU TAKE TRADE AFTER USING THESE PATTERNS :-

 Take trade when breakout is happened and candle close outside the pattern
 Set stop loss at the lower low of last candle
 Set take profit as same as the height of the total pattern
 Retest on the pattern indicates the conformation of the pattern

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Wedge Crypto Graph Patterns:-
Types of wedges pattern.

1) Rising Wedge Pattern

Wedges are another sub-type of triangle chart patterns. A rising wedge is a
bearish reversal pattern that comes to life when the price of an asset forms lower
highs and higher lows. This pattern signals that the price is likely to continue to
fall. It gives a sell signal. Here are some things that can point towards a pattern
being a rising wedge:

 The price forms lower highs and higher lows.

 There is horizontal resistance at a certain price level.
 It is the middle of a downtrend.

2) Falling Wedge Pattern

A falling wedge is a bullish reversal pattern that, just like the name suggests, is
the opposite of the rising wedge. It occurs when there are higher highs and lower
lows on the price chart. A falling wedge usually gives a buy signal as it is a sign
that an uptrend will probably continue. There are several ways to identify a
falling wedge. These are some of the things you can look for:

 The asset forms higher highs and lower lows.

 You can observe horizontal support.
 It is the middle of an uptrend

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Rectangle Chart Patterns

A rectangle chart pattern is created when the price of an asset consolidates

between two horizontal levels of support and resistance. This chart pattern can
signal that the price is about to break out in either direction

1) BULLISH RECTANGLE

A bullish rectangle is a chart pattern that is created when the price of an asset
cannot break out through either the top or the bottom horizontal line and ends up
consolidating between the support and resistance levels. This chart pattern
signals that the price is likely to break out to the upside — so it gives a buy signal.
Here are the defining characteristics of a bullish rectangle:

 Price consolidation between two horizontal levels of support and resistance.

 This chart pattern is typically found at the end of a downtrend.

2) BEARISH RECTANGLE

A bearish rectangle is the opposite of the bullish rectangle. It happens when asset
price “gets stuck” in between two horizontal levels of support and resistance. A
bearish rectangle usually gives a sell signal as it is a sign that the price is likely to
continue to fall.

 Price consolidation between two horizontal levels of support and resistance.

 This chart pattern is typically found at the end of a downtrend.

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Double Top Crypto Pattern

A double top is one of the most common crypto chart patterns. It is characterized
by the price shooting up twice in a short period of time — retesting a new high. If
it fails to go back to that level and cross over the upper horizontal line, it typically
signifies that a strong pullback is coming. This is a bearish reversal pattern that
gives a sell sign

Double bottom crypto pattern

A double bottom is a chart pattern that, as can be seen from its name, is the
opposite of the double top. It occurs when the asset price tests the lower
horizontal level twice but then pulls back and goes up instead. A double bottom
usually gives a buy signal
as it is a sign that there will likely be an uptrend

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Triple Top Chart Pattern

The triple top and bottom patterns are very similar to their “double” counterparts.
The triple top also occurs when the price of an asset tests the upper horizontal
line but fails to cross over it — but for this pattern, it happens thrice. It is a
bearish reversal pattern that signals an upcoming downward trend.

Triple Bottom Chart Pattern

The triple bottom crypto chart pattern is observed when asset price reaches a
certain level and then pulls back two times before finally kicking off a bullish
trend

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Pole Chart Patterns
Pole chart patterns are characterized by the price of an asset reaching a certain
level and then pulling back before returning to that level. These patterns get their
name from the “pole” present in them — a rapid upward (or downward) price
movement

1) Bullish Flag Pattern

A bullish flag is a chart pattern that occurs when the asset price reaches a certain
level and then pulls back before reclaiming that level. A bullish version of this
crypto flag pattern usually gives a buy signal as it is a sign that an uptrend will
probably continue. You can read more about it here. The most distinctive thing
about this pattern is, unsurprisingly, its shape: a pole followed by a flag. Here’s
how it’s structured:

 Drastic upward price movement

 A brief consolidation period with lower highs
 A bullish trend

2) Bearish Flag Pattern

A bearish flag is the complete opposite of a bullish flag crypto chart pattern. It is
formed by a sharp downtrend and consolidation with higher highs that ends
when the price breaks and drops down. These flags are bearish continuation
patterns, so they give a sell signal

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Bullish Pennant Pattern:-

A bullish pennant is a bullish pole chart pattern rather similar to a bullish flag. It
also has a pole — a shart uptrend — followed by a brief (or not so brief)
consolidation, and then a continued uptrend. Unlike the flag, however, its
consolidation period is shaped like a
triangle: it has higher lows and lower highs. It gives a buy signal.

Bearish Pennant Pattern:-

A bearish pennant is, naturally, the opposite of a bullish pendant. Its pole is a
sharp downward price movement, and it is followed by a price decrease. It gives a
sell signal. Pennants are also defined by trading volume: it should be
exceptionally high during the “pole” and then slowly whittle
down during consolidation. They usually last between one and four weeks

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 CHAPTER 6.
IMPORTANT CHART PATTERNS
There are also several other chart patterns that you can look for when trading cryptocurrencies.
Here are a few of the most common ones
Head and Shoulders Chart Patterns:-

Chart analysis is one of the best tools in trading crypto. Here’s how to identify a
head and shoulders pattern. A more advanced chart pattern, the head and
shoulders chart pattern, occurs when the price of an asset reaches a certain level
and then pulls back before retaking that level. This chart pattern can be either
bullish or bearish, depending on where it occurs in the market cycle.

Inverted Head and Shoulders:-

One of the more advanced technical analysis patterns, inverted head and
shoulders, should be used with other indicators before taking a position. The
inverted head and shoulders chart pattern is created when the price of an asset
reaches a certain level and then pulls back before reaching that level again. This
chart pattern is usually bullish and gives a buy signal as it is a sign that an
uptrend will probably continue. Just like the name suggests, it is the inverted
version of the traditional head and shoulders pattern

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Cup and Handle:-

The cup and handle is a pattern that can be observed when the price of an asset
reaches a certain level and then pulls back before reclaiming that level. It is
named like that because it actually looks like a cup.

This chart formation is often referred to as the bullish reversal pattern. However,
it can give either a bullish or a bearish signal — it all depends on what point of
the cycle it is seen in.

Rounded Top and Bottom Crypto Chart Pattern:-

The rounded top and bottom chart pattern appears when the price of an asset
reaches a certain level and then pulls back before retaking that level.

This chart pattern can be either bullish or bearish, depending on where it occurs
in the market cycle.

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The Failure Swing Trading Crypto Chart Patter:-

The failure swing chart pattern happens if the asset price reaches a certain level
and then pulls back before reaching that level again. Common failure chart
patterns typically involve trend lines, such as breakouts before a fail point, or
descending triangles. When these patterns appear on charts, they may indicate
that a reversal or pullback is due; however, false signals can occur if the
underlying conditions or fundamentals do not support the formation of the
pattern.

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How to Trade Crypto Using Chart Patterns:-

When it comes to trading crypto using chart patterns, there are

a few things you need to keep in mind.
1) Make sure that the chart pattern is valid. This means that it should
meet all of the criteria we discussed earlier.
2) Wait for a confirmation signal before entering a trade. A
confirmation signal is something like a breakout or a candlestick
pattern.
3) Have a proper risk-reward ratio. This means that your potential
profits should be greater than your potential losses.
4) Have a plan for exiting the trade. This includes setting a profit
target and a stop-loss order.

If you are an experienced trader or have a higher-than-average risk

appetite, you can try to trade patterns before the confirmation.
However, please remember that it is incredibly risky — not to mention
insanely hard. While these patterns are easy to identify in retrospect,
they can be not-so easy to notice
when they are just happening. Of course, ыщьу tools and indicators (or
even bots) can help with that, and you will get better at catching them
as you practice more, but they can still be incredibly treacherous.

Crypto Chart Pattern Success Rate:-

There are many different chart patterns that you can use to trade
crypto, but not all of them are equally effective. Some chart patterns
have a higher success rate than others.

For example, the head and shoulders pattern has a success rate of
about 70%. On the other hand, the cup and handle pattern has a
success rate of about 80%. At the end of the day, what matters most is
using the patterns that fit your trading strategy best, as well as utilizing
proper risk management

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 Risk Management

Risk management is incredibly important when it comes to trading crypto chart

patterns. No matter how good or prominent the chart pattern is, things can
always go wrong. So, it’s crucial to have a solid risk management strategy in place
before you start trading and adjust it accordingly. Here are some things to keep in
mind:

 Set a stop loss. This is probably the most important thing you can do in
terms of risk management. A stop loss will help you limit your losses if the
trade goes against you.

 Use a take profit target. A take profit target will help you lock in profits if
the trade goes in your favor.

 Use a trailing stop. A trailing stop is a great way to protect your profits
because it will automatically sell your position if the price starts to fall.

 Manage your position size. Position size also matters. You don’t want to
risk too much of your account on one trade.

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