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Candlestick Patterns for Trading Success

This document provides an overview of various candlestick patterns used for technical analysis of financial markets. It defines the components of a candlestick chart and describes the formation and implications of hammer, inverted hammer, bullish/bearish engulfing, piercing line, dark cloud, bullish/bearish harami, morning star, evening star, doji candlestick patterns. It also discusses gap theory and how gaps are formed when the open is equal to the high or low. The document serves as an educational guide for understanding common candlestick patterns used in derivatives trading analysis.

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trade.satishss
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147 views17 pages

Candlestick Patterns for Trading Success

This document provides an overview of various candlestick patterns used for technical analysis of financial markets. It defines the components of a candlestick chart and describes the formation and implications of hammer, inverted hammer, bullish/bearish engulfing, piercing line, dark cloud, bullish/bearish harami, morning star, evening star, doji candlestick patterns. It also discusses gap theory and how gaps are formed when the open is equal to the high or low. The document serves as an educational guide for understanding common candlestick patterns used in derivatives trading analysis.

Uploaded by

trade.satishss
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
  • Introduction to Candlestick Patterns
  • Candle Construction
  • Candlestick Components
  • Hammer
  • Inverted Hammer
  • Bullish Engulfing
  • Bearish Engulfing
  • Piercing Line
  • Dark Cloud Cover
  • Bullish Harami
  • Bearish Harami
  • Morning Star
  • Evening Star
  • Doji
  • Gap Theory
  • Open - High/Low Theory

Comprehensive Online Trading Program

CANDLESTICK PATTERNS

[Link]
Candle Construction

High

Close Open

Open Close

Low

[Link]
Candle Stick Components

Wick

Real Body

Tail

[Link]
Candlestick : Hammer

Hammer

 Candle body is small

 Single candle pattern

 Body is at the top

 The wick is usually two times the size of the body

 Body colour can be green or red

 Upper shadow may or may not be there

 Spot it in a downtrend for reversal

[Link]
Candlestick : Inverted Hammer

Inverted Hammer ( Shooting Star )

 Candle body is small

 Single candle pattern

 Body is at the bottom

 The wick is usually two times the size of the body

 Body colour can be green or red

 Lower shadow may or may not be there

 Spot it in a Uptrend for reversal

[Link]
Candlestick : Bullish Engulfing

Bullish Engulfing

 Body of second candle completely engulfs

 Second candle body is green colour

 It’s a double candle pattern

 Should spot after a downtrend

 Entire body should engulf previous candle

[Link]
Candlestick : Bearish Engulfing

Bearish Engulfing

 Body of second candle completely engulfs

 Second candle body should be red colour

 It’s a double candle pattern

 Should spot after an uptrend

 Entire body should engulf previous candle

[Link]
Candlestick : Piercing Line

Piercing Line

 50% body should engulf previous red candle

 Second candle body should be green colour

 It’s a double candle pattern

 Should spot after a downtrend

[Link]
Candlestick : Dark Cloud

Piercing Line

 50% body should engulf previous green candle

 Second candle body should be red colour

 It’s a double candle pattern

 Should spot after an uptrend

[Link]
Candlestick : Bullish Harami

Bullish Harami

 Green body should be inside previous red candle

 Second candle body should be green colour ( small body )

 It’s a double candle pattern

 Should spot after an downtrend

[Link]
Candlestick : Bearish Harami

Bearish Harami

 Red body should be inside previous green candle

 Second candle body should be red colour ( small body )

 It’s a double candle pattern

 Should spot after an uptrend

[Link]
Candlestick : Morning Star

Morning Star Pattern

 Morning star is a bottom reversal

 Three candle comprise this pattern

 First candle is red

 Second candle is a small body candle

 Third candle is a bullish green candle

 Pattern completion gives bullish reversal

 Spot it after a downtrend

[Link]
Candlestick : Evening Star

Evening Star Pattern

 Evening star is a top reversal pattern

 First candle is a green candle

 Second candle is a small body candle

 Third candle is a bearish red candle

 It’s a three candle pattern

 Pattern completion gives bearish indication

 Spot it after an uptrend

[Link]
Candlestick : Doji

AFTER UPTREND AFTER DOWNTREND

[Link]
Candlestick : Doji

[Link]
Gap Theory

GAP DOWN GAP UP

Open Gap Open Gap

[Link]
Open = High & Open = Low

[Link]

www.derivativetradingacademy.com Comprehensive Online Trading Program CANDLESTICK PATTERNS
www.derivativetradingacademy.com Candle Construction Open Close High Low Open Close
www.derivativetradingacademy.com Candle Stick Components Real Body Wick Tail
www.derivativetradingacademy.com Candlestick : Hammer Hammer Candle body is small Single candle pattern Body is at the t
www.derivativetradingacademy.com Candlestick : Inverted Hammer Inverted Hammer ( Shooting Star ) Candle body is small Sin
www.derivativetradingacademy.com Candlestick : Bullish Engulfing Bullish Engulfing Body of second candle completely engulf
www.derivativetradingacademy.com Candlestick : Bearish Engulfing Bearish Engulfing Body of second candle completely engulf
www.derivativetradingacademy.com Candlestick : Piercing Line Piercing Line 50% body should engulf previous red candle Sec
www.derivativetradingacademy.com Candlestick : Dark Cloud Piercing Line 50% body should engulf previous green candle Seco
www.derivativetradingacademy.com Candlestick : Bullish Harami Bullish Harami Green body should be inside previous red cand

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