Chart Analysis - Reading The Language of The Market

Today, candlestick patterns have become one of the most powerful tools for predicting the price movement of an asset.

Many technical analysts use candlestick patterns to represent multiple timeframes into a single color-coded candle.

What is a Candlestick?

Candlestick pattern is a type of price charting technique used in technical analysis that helps a trader/investor to identify the high, low, open, and closing price of an asset for a specific timeframe.

Candlestick patterns can be used to chart different asset types like stocks, derivatives (futures and options), currencies, cryptos, etc., to assume their future price movement.

A brief history of candlestick patterns

Back in the 18th century, candlesticks were used by rice traders of the Ojima Rice market to analyze the price of rice.

It was one of the earliest technical charting tools used by Munehisa Homma, a rice trader from Sakata, Japan; it became popular around 1850.

Eventually, the United States and other trading communities worldwide started using them for stock market trading.

Let us now understand the basics of candlestick patterns.

In Seben Capital, we only trade these patterns

• Big Fat Candles (Marubozu)- Candle Without Wicks or Small Wicks

• Doji - A doji is a candlestick with a small body and long wicks. It is a neutral pattern that can indicate indecision or a potential reversal.

• Hammer - There are two types of hammer candles - bullish hammer and bearish hammer

• Shooting Stars - There are two Types of Shooting Starts: 1. Morning Stars 2. Evening Star

• Engulfing Patterns - Engulfing Patterns combines two candles, and this is also a reversal pattern and is two types, bullish and bearish.

• Harami patterns - The Harami candlestick pattern involves two candles. One large candle precedes a small candle. The body of the large candle completely engulfs the body of the next smaller candlestick.