Tips Read Candlestick Patterns For Beginners!

For stock traders, of course. They must know how to how to read candlestick patterns for beginners to analyze stock charts. The candlestick chart application is a chart or stock indicator that looks like a candlestick. These candlestick patterns are diverse, making this chart more difficult to understand when compared to similar Line Charts.

However, the data provided through the Candlestick Chart is more detailed than the Line Chart. In the world of stock trading, candle patterns will display price movements in the form of up and down charts. The historical data becomes a medium for conducting technical analysis.

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This candlestick pattern has a shape that resembles a candlestick. This chart is commonly used to analyze the movement of stocks, forex, to commodities. But not infrequently, traders find it difficult because of complicated patterns when trying to read them. In fact, there is a simpler and more accurate way to how to read candlestick patterns for beginners.

Best Candlestick Patterns

The body or candlestick is the embodiment of the opening price and closing price. If the candle is red, it means that the closing price is lower than the opening price. However, if the candle is green, then the closing price is higher than the opening price.

The definition of a candlestick itself is a chart or graph that presents fluctuating stock price information. Literally, the Candle pattern is a candlestick, because it is in the form of a bar graph. This way of reading candlestick patterns is commonly used in studying stocks, forex, and commodities in the capital market.

Candlestick patterns were introduced by Munehisa Honma, a man from Japan who was a rice commodity trader in the 18th century. Candlesticks are used to record the market price of rice from period to period. This information is used to predict the direction of rice price movements in the future.

How to Read Candlestick Patterns For Beginners

Candlestick patterns can be applied with the principle of supply and demand. This principle will show the psychological condition of the seller and the buyer. This method helps analyze a number of financial assets, such as stocks, cryptocurrencies, and forex. The use of candlestick charts is included in the category of discretionary methods.

The simplest way to read a candlestick pattern can be started by looking at the body chart of the candle (candle). Where the pattern candle will represent some information, namely the body of the candle displays information on the opening or closing price, while the tail of the candle displays the highest and lowest prices.

Here are some ways to read Candlestick Charts by analyzing the following elements:

- Body size

You can get information about the strength of each side through the size of the candle body. If the body of the candle is elongated, it means that the momentum is strengthening, on the other hand, if the size is smaller, the momentum is getting slower.

- Axis Length

The length of the wick of the candle is related to the volatility of the stock price. The long wick means that the price is moving fast in the candlestick period.

- Ratio of Body Length and Axis

If the body size is long enough with a smaller axis, then it indicates a market trend with high momentum. However, the candle body will shrink with a longer wick when market conditions are uncertain and volatility will increase.

- Body Position

If the position of the body is at one end with the long axis, it will indicate resistance. Conversely, if the body is in the middle of the axis, it will indicate an uncertainty in the market.

Candlestick Pattern Book

To understand candlestick patterns, traders must master how to read correct and accurate candlestick patterns. Because, data from candle patterns such as the value of the opening, highest, lowest, and closing prices or commonly called OHLC (Opening, High, Low, Closing). The data from the OHLC becomes a guideline for analyzing a candlestick.

The candlestick pattern is the key. In trading there is a reversal pattern (candle reversal pattern). In candlestick science, there are many reversal patterns, singles, or multiples. This is an opportunity for traders to earn huge potential profits, whether the price is closing higher or lower.

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If you want to follow the trend, then use the H4 and D1 time frames. You have to patiently wait for another pattern to appear. You are prohibited from opening a position when there is no candlestick pattern. In a larger time frame, the signal will be minimized. On the other hand, in a smaller time frame, a false signal is more likely to occur.

Components of a Candlestick Chart

To understand how to read a candlestick pattern, you first need to know the components contained in a candlestick. Here's the explanation.

a. Body Candle

Body is the part that presents the price of the opening (opening) and closing (closing). The shape is a red or green rectangle, depending on the conditions. If it is colorless, it will be displayed in black and white.

b. Shadow Candle

Shadow or candle tail in the form of a longitudinal line above or below the body. The color follows the body of the candle. This section indicates the stock's lowest and highest prices. The colors used for the body also have meaning.

The red color indicates a bearish occurrence, namely the decline in stock prices lower than the opening. The green color indicates a bullish, higher share price compared to the open. If the candlestick is colorless, bearish is indicated in black. Meanwhile, bullish is indicated by white color.

Types of Candlestick Patterns

There are several types of candlestick patterns that usually appear to analyze stock price fluctuations. These patterns are used as a way, how to read candlestick patterns for beginners in stock transactions. Here's the explanation:

1. Hammer

This reversal pattern leads from a downtrend (decreased over time) to an uptrend (up from its lowest point). Or it can be said from bearish to bullish with a long tail.

The length of the tail is twice the length of the body. The position of the body is in a downtrend. The existence of a confirmation point confirms the entry of the stock into the market.

2. Inverted Hammer

This pattern is an inverted hammer, i.e. the difference lies in the downtrend to the uptrend. In other words, from decreasing to increasing.

Same with hammer, tail length twice body length. The position is in a downtrend and indicates the stock is entering the market.

3. Hanging Man

The hanging man pattern is a reversal pattern from bullish to bearish. In this pattern, the tail length is twice the body length and is in an uptrend position.

4. Shooting Star

How to read candlestick patterns for beginners can be started from the shooting star pattern. This is a reversal from an uptrend to a downtrend. The condition for this pattern is that the length of the tail must be twice the length of the body and be in an uptrend position. There is a confirmation point indicating confirmation of entry into the market.

5. Spinning Top

This pattern indicates an uncertain market. It could be that the market is getting saturated with buying and selling. In addition, there is equal power between the seller and the buyer.

Body candle looks small with a tail at the top and bottom. The position can be in a downtrend and an uptrend. It is recommended that the transaction be postponed until the next candle appears.

6. Candle Doji

The doji shows the same strength between sellers and buyers as a spinning top. This means that the market is uncertain or there is a change in trend. Doji has no real body, it can be in an uptrend or downtrend. As a suggestion, the next candle should appear.

7. Dragonfly Doji

Dragonfly doji shows equal power between buyers and sellers. It also indicates an uncertain market or a possible change in trend.

Dragonfly doji does not have a real body, only consists of a tail that makes a T-shaped shape. Its position can be in an uptrend or downtrend. When you understand how to read candlestick patterns for beginners well, it is not recommended to enter the market if this sign appears.

8. Gravestone Doji

This pattern is the opposite of the dragonfly doji, its shape is like an upside down T. Chances are there will be a change in trend. This pattern has no real body shape. The position can be in an uptrend or downtrend. It is not recommended to enter the market, you should wait until there is a new candle.

9. Morning Star

The morning star shows a reversal pattern from an uptrend to a downtrend. There are three candle formations. The first is a bigger bearish trend than the second candle, namely spinning tops. The third has a body that is almost the same or larger than the first candle and is a bullish candle. The third position is in a downtrend.

10. Evening Star

This pattern indicates a reversal from bullish to bearish. Evening star is the opposite of morning star. The first candle is a bullish trend and is bigger than the second candle. The second candle is a spinning top. The third candle has almost the same or even larger body than the first candle. This third candle is bearish.

By knowing and mastering how to read candlestick patterns for beginners and the types of candle patterns above, you can easily read simple and accurate Candlestick Charts. Well, that's information on how to read Candlestick Charts easily and accurately. May be useful!

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