Here are just a few charts of candlestick reversal patterns. They are not necessarily at good places to trade but I am just using these as examples of what to look for in the trading zone.
Pattern 1: Price moves down to the possible support level. A doji forms and the next candle close above the high of the doji. There are a few ways to play this, you could put a pending buy order just above the high of the doji or just wait until the signal candle closes and take a market order. If it is strong s/r or an add on I will tend to place a pending order.
Pattern 2: A similar pattern but not quite as clear. The signal candle makes a lower close after touching resistance. If you were ultra picky you would only trade recognisable candle patterns such as the above doji formation and/or one or two others but if a pattern such as this occurs in the right location you can still be confident of a move in your favour.
Pattern 3: Two here, the first one is an opposite and equal. The high, the low and the bodies are the same just that one is an up candle and one a down candle. When two candles have wicks with the same high or low they are called tweezer tops and bottoms. Variations of this occur regularly and they are a good signal. The next is another doji formation.
Pattern 4: This has various names and I think of it as a jackhammer (John Person calls it that I think? Good books by the way). You can see where the price opened, moved up to resistance and then dropped back to make a lower close. This is another good strong signal.
Pattern 5: Another example of the above.
By the way I don't get too hung up on what these formations are called. When I first learnt about candlestick charting I tried to memorise all of the names for the patterns as if it mattered. The important thing is that you learn to spot them as they set up.
I hope this has helped someone?
Pattern 1: Price moves down to the possible support level. A doji forms and the next candle close above the high of the doji. There are a few ways to play this, you could put a pending buy order just above the high of the doji or just wait until the signal candle closes and take a market order. If it is strong s/r or an add on I will tend to place a pending order.
Pattern 2: A similar pattern but not quite as clear. The signal candle makes a lower close after touching resistance. If you were ultra picky you would only trade recognisable candle patterns such as the above doji formation and/or one or two others but if a pattern such as this occurs in the right location you can still be confident of a move in your favour.
Pattern 3: Two here, the first one is an opposite and equal. The high, the low and the bodies are the same just that one is an up candle and one a down candle. When two candles have wicks with the same high or low they are called tweezer tops and bottoms. Variations of this occur regularly and they are a good signal. The next is another doji formation.
Pattern 4: This has various names and I think of it as a jackhammer (John Person calls it that I think? Good books by the way). You can see where the price opened, moved up to resistance and then dropped back to make a lower close. This is another good strong signal.
Pattern 5: Another example of the above.
By the way I don't get too hung up on what these formations are called. When I first learnt about candlestick charting I tried to memorise all of the names for the patterns as if it mattered. The important thing is that you learn to spot them as they set up.
I hope this has helped someone?
Attached Image(s) (click to enlarge)
