Every candlestick tells a story of the showdown between the bulls and the bears, buyers and sellers, supply and demand, fear and greed.
It is important to keep in mind that most candle patterns need a confirmation based on the context of the preceding candles and proceeding candle. Many newbies make the common mistake of spotting a single candle formation without taking the context into consideration.
For example, a hammer candle represents a near-term capitulation bottom if it forms after three preceding bearish candles, whereas hammer candle that forms on ‘flat’ sideways candles is basically useless.
Therefore it pays to understand the ‘story’ that each candle represents in order to attain a firm grasp on the mechanics of candlestick chart patterns. These patterns tend to repeat themselves constantly, but the market will just as often try to fake out traders in the same vein when the context is overlooked.
Candlestick charts tend to represent more emotion due to the coloring of the bodies. It’s prudent to make sure they are incorporated with other indicators to achieve best results. The following are some of common candlestick reversal patterns.
Checkout
this article about candlesticks that dissects the importance of candlesticks for daytrading. You might pick up a thing or two by reading this.
