Bullish and Bearish Candlestick Patterns
Bullish and bearish candlestick patterns are always necessary in trading for the prediction of the price movement of a security or currency that is being traded. Such candlestick patterns serve as a method with which one looks at reversals and trends within the market, able to show an indication of market sentiment.
The bullish candlestick patterns indicate upward action in prices, mostly coming after a decline. Usual instances that occur in this respect include:
Bullish Engulfing Pattern: A small bearish candle followed by one that is larger and bullish—all this indicates a reversal.
Hammer: A candle with a small body and a rather long lower shadow, indicating that buyers are stepping in.
Morning Star: This is a three-candle pattern that reflects the transition from pressure on selling to that of buying.
Bearish candlestick patterns reflect potential price falls following an uptrend. The notable patterns in this respect are:
Bearish Engulfing Pattern: When a small bullish candle is followed by a larger bearish one—a thing that can imply a downtrend.
Shooting Star: This is a candle with an extended upper shadow, which indicates that buyers were overpowered by sellers.
Evening Star: A reversal pattern that involves three candles, starting the termination of an uptrend.
Familiarity with these candlestick patterns will foster informed decision-making by traders. However, a combination of these candlestick patterns with other technical indicators boosts the accuracy in formulating trading strategies. Market sentiment, if well known through the patterns discussed hereinabove, can greatly bolster up trading success.
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