The Top Five Most Consistent Candlestick Patterns
Introduction
Candlesticks are the components of candlestick charts which convey or communicate price movement. By studying the candlestick patterns, one would know the price action or the movement of a currency pair over a given time period. Candlestick charts are based on the period of time over which they convey information; can be classified as hourly, daily, weekly charts and so forth. There are a variety of candlestick patterns that have come up over time. Candlesticks are vital in trading as they give traders an insight into market emotions; the reactions of dealers regarding certain changes in the market. Candlesticks therefore are very important trade indicators and should thus be carefully utilized.
Consistent candlestick patterns
For candlesticks to be relied upon, they have to display consistency. Among the many candlesticks patterns employed in the market today, the following are considered the most consistent in terms of price action and trend communication.
Piercing Line
This candlestick pattern is a bullish reversal pattern meaning sellers are slowly losing their market dominance. This pattern has two candles: the bullish candlestick and the bearish candlestick.
For illustration purposes, assign the red bodied bearish candle Day 1 and the bullish candle Day 2. A piercing line pattern occurs when the green bodied Day 2 bullish candle closes the trading day above half of the Day 1 bearish candle. The price gaps down then filled to compensate the trading losses previously incurred in Day 1 bearish candle. The bullish market emotion can be read from the fact that the bulls on Day 2 reject the gap and push further into the previous bearish Day 1 losses.
The rejection of the gap up by the bulls is a major bullish sign, and the fact that bulls were able to press further up into the losses of the previous day adds even more bullish sentiment. To confirm the consistency of the piercing pattern, more bullish trend is normally experienced before a buy signal is issued.
Dark cloud cover
This pattern signifies a buying momentum that is generally slower. It’s a typical bearish reversal pattern. The candle stick arrangement in this pattern consists of a long green bodied bullish candle followed by red candle. The bearish candle opens at a price higher than the previous bullish candle close. The bearish candle then plunges deep into the bullish candle’s body.
The dark cloud cover is a sign that lower prices are coming up. Its appearance is interpreted to mean an up-trend.
The market emotion conveyed by this candlestick pattern is that of an excited and energetic market. Consistent with other indicators, this pattern is signals a strong downward move and the deeper the red candlestick penetrates into the green candlestick, the more likely the trades made based on the dark cloud cover will succeed.
Evening star Chart pattern
This is a bearish reversal pattern. It indicates that after making new highs, the price pattern has changed. It is represented by three candlesticks with the middle or second candle being small also referred to as the star.
The first warning that the trend is taking a downward plunge or that the bulls are losing steam is given by the star. This trend is popular among traders for its reliability as a change signal. It is advisable to trade immediately after the pattern has closed. To set a reliable profit take target however another technical or fundamental analysis tools have to be considered in addition.
Morning star chart pattern.
This is pattern signals that the trend has changed after making new lows. It is categorized under bullish reversal patterns. This pattern like the evening star consists of three candles.
The first candle is red followed by small bodied green candle then a long green candle follows. The small candle signals market indecisiveness or bear exhaustion. The morning star gives a strong indication of a major market low. To trade this pattern, a trader is advised to wait until the pattern closes. After consulting and interpreting other results of technical analysis, the trader can take then a long position.
Engulfing pattern
This pattern gives an indication of a reversal. It is made up of two candlesticks red and green bodied candlesticks. Since it is a reversal, an engulfing pattern can be either a Bearish Engulfing Pattern or a Bullish engulfing pattern. In the event of a bullish engulfing pattern which occurs in a downward trend, the green candle’s body completely penetrates the previous red candlestick’s body.
The Engulfing Pattern occurs where the red candlestick completely submerges into the previous green candlestick. The rationale behind this pattern is that either the bulls or bears are losing momentum during the first candle and the opposite (bear or bull) makes a strong run in the second candle which as we saw could either be red or green depending on the first candle.
Appoint to note here is that the market has to be in a clear identifiable position prior to the occurrence of the Engulfing pattern. Also the candle body sizes matter a lot; the bigger the difference in size between the two candles, the more significant the reversal point is.
For one to trade, they should ensure that the pattern has closed and confirmation should be made that it is truly an Engulfing pattern before one can trade it.
In summary, these are the most reliable and consistent candle stick patterns. Remember before you enter any trade based on a given pattern, the occurrence of the pattern has to be established to avoid using inappropriate trading strategies.
Candlesticks are the components of candlestick charts which convey or communicate price movement. By studying the candlestick patterns, one would know the price action or the movement of a currency pair over a given time period. Candlestick charts are based on the period of time over which they convey information; can be classified as hourly, daily, weekly charts and so forth. There are a variety of candlestick patterns that have come up over time. Candlesticks are vital in trading as they give traders an insight into market emotions; the reactions of dealers regarding certain changes in the market. Candlesticks therefore are very important trade indicators and should thus be carefully utilized.
Consistent candlestick patterns
For candlesticks to be relied upon, they have to display consistency. Among the many candlesticks patterns employed in the market today, the following are considered the most consistent in terms of price action and trend communication.
Piercing Line
This candlestick pattern is a bullish reversal pattern meaning sellers are slowly losing their market dominance. This pattern has two candles: the bullish candlestick and the bearish candlestick.
For illustration purposes, assign the red bodied bearish candle Day 1 and the bullish candle Day 2. A piercing line pattern occurs when the green bodied Day 2 bullish candle closes the trading day above half of the Day 1 bearish candle. The price gaps down then filled to compensate the trading losses previously incurred in Day 1 bearish candle. The bullish market emotion can be read from the fact that the bulls on Day 2 reject the gap and push further into the previous bearish Day 1 losses.
The rejection of the gap up by the bulls is a major bullish sign, and the fact that bulls were able to press further up into the losses of the previous day adds even more bullish sentiment. To confirm the consistency of the piercing pattern, more bullish trend is normally experienced before a buy signal is issued.
Dark cloud cover
This pattern signifies a buying momentum that is generally slower. It’s a typical bearish reversal pattern. The candle stick arrangement in this pattern consists of a long green bodied bullish candle followed by red candle. The bearish candle opens at a price higher than the previous bullish candle close. The bearish candle then plunges deep into the bullish candle’s body.
The dark cloud cover is a sign that lower prices are coming up. Its appearance is interpreted to mean an up-trend.
The market emotion conveyed by this candlestick pattern is that of an excited and energetic market. Consistent with other indicators, this pattern is signals a strong downward move and the deeper the red candlestick penetrates into the green candlestick, the more likely the trades made based on the dark cloud cover will succeed.
Evening star Chart pattern
This is a bearish reversal pattern. It indicates that after making new highs, the price pattern has changed. It is represented by three candlesticks with the middle or second candle being small also referred to as the star.
The first warning that the trend is taking a downward plunge or that the bulls are losing steam is given by the star. This trend is popular among traders for its reliability as a change signal. It is advisable to trade immediately after the pattern has closed. To set a reliable profit take target however another technical or fundamental analysis tools have to be considered in addition.
Morning star chart pattern.
This is pattern signals that the trend has changed after making new lows. It is categorized under bullish reversal patterns. This pattern like the evening star consists of three candles.
The first candle is red followed by small bodied green candle then a long green candle follows. The small candle signals market indecisiveness or bear exhaustion. The morning star gives a strong indication of a major market low. To trade this pattern, a trader is advised to wait until the pattern closes. After consulting and interpreting other results of technical analysis, the trader can take then a long position.
Engulfing pattern
This pattern gives an indication of a reversal. It is made up of two candlesticks red and green bodied candlesticks. Since it is a reversal, an engulfing pattern can be either a Bearish Engulfing Pattern or a Bullish engulfing pattern. In the event of a bullish engulfing pattern which occurs in a downward trend, the green candle’s body completely penetrates the previous red candlestick’s body.
The Engulfing Pattern occurs where the red candlestick completely submerges into the previous green candlestick. The rationale behind this pattern is that either the bulls or bears are losing momentum during the first candle and the opposite (bear or bull) makes a strong run in the second candle which as we saw could either be red or green depending on the first candle.
Appoint to note here is that the market has to be in a clear identifiable position prior to the occurrence of the Engulfing pattern. Also the candle body sizes matter a lot; the bigger the difference in size between the two candles, the more significant the reversal point is.
For one to trade, they should ensure that the pattern has closed and confirmation should be made that it is truly an Engulfing pattern before one can trade it.
In summary, these are the most reliable and consistent candle stick patterns. Remember before you enter any trade based on a given pattern, the occurrence of the pattern has to be established to avoid using inappropriate trading strategies.
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| The Top Five Most Consistent Candlestick Patterns |
These are candlestick patterns that experience shows have the most relevance to making consistently profitable trading decisions.watch here for more details
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