How to Learn Top 10 Price Action Candlestick Pattern | Share Market Profile

How to Learn Top 10 Price Action Candlestick Pattern | Share Market Profile

Candlestick pattern is an age-old technical tool used by investors and traders to invest in the stock market. This tool helps in spotting open-high, low-close bars which connect the dots of closing prices.

Traders study candlestick patterns to understand the price direction of stocks with the help of color coding. In the earlier days this tool was used by Japanese traders. Today we have more than dozens of charts called by various names to identify different kinds of price trends. The top 10 price action candlestick patterns are listed below.

  1. Reversal Candlestick Pattern
  2. Key Reversal Candlestick Pattern
  3. Exhaustion Candlestick Pattern
  4. Pinocchio Candlestick Pattern
  5. Two Candle Reversal
  6. Three Candle Reversal
  7. Three Candle Pullback
  8. Inside Candle Patterns
  9. Outside Candle Pattern
  10. Narrow Range
  1. Reversal Candlestick Pattern

The reversal candlestick pattern shows the end of a trend in a market. At the end of a downtrend it is a bullish reversal and at the end of an uptrend it indicates a bearish reversal. A bullish reversal indicates the end of traders selling spells among traders and the start of the buying spell. In a bearish reversal it indicates the end of the buying spree among traders and the start of the selling spree. This indicates the onset of a slump in the market. In an uptrend the traders use the information from the chart to buy shares above the bullish reverse candle. Whereas in a downtrend the traders sell below the bearish reversal candle.

  1. Key Reversal Candlestick Pattern

A key reversal candlestick pattern is a single day trading pattern in which the pattern of prices shows the reversal of a trend. The blueprint can show an uptrend or a downtrend. In an uptrend chart the stocks hit a new high and the stock prices closes at the previous day low. In a downtrend chart the stock prices hit a new low and it closes at a new day low.  If the price range and the volume is high the signal can be all the more trusted upon.

  1. Exhaustion Candlestick Pattern

An exhaustion candlestick pattern can be recognized when an investor can see a breakout from a long trend of price rise of stocks to a downward trend or a long trend of price losses to an upward trend of price rise of stocks. A state of exhaustion usually reaches in the market when the traders are trading on one side of the transaction on a particular asset. If the exhaustion shows a tilt towards the buyer or the seller it indicates a sideways drift.

  1. Pinocchio Candlestick Pattern

This candlestick was historically made by a rice trader Muneisha Honma who believed that the candlestick pattern represents the emotions of the traders. He believed that the candlestick was the graphical representation of emotion of the trading community. There are two kinds of pin bars.

  1. Bullish Pin bar
  2. Bearish Pin bar

A bullish pin bar is an indication of rejection of lower prices and a bearish pinbar indicates the rejection of higher prices. Pin bar is an important tool which is also used for forex trading.

  1. Two Candle Reversal

A few reverse candles consist of two candles which can be seen at the top or bottom of a short term trend. It is used for locating a trend reversal. The trend reversal is either reversal of the main trend or a correction of an ongoing trend. It helps in determining the short term trend direction.

  1. Three Candle Reversal

This candle reversal pattern consists of three candles. They indicate that the current trend is losing its momentum and any prior existing trend would show a reversal. There are two kinds of reversals. The three inside up pattern is one kind of reversal which shows a bullish reversal pattern. Whereas the three inside down pattern shows a bearish reversal pattern. They indicate short term changes.

  1. Three candle pullback

The three sides up or the three side down pattern is again a candlestick reversal pattern which signifies the end of a momentum and the start of a new trend in the opposite direction. These patterns are short lived and do not signify any long term impact in the market.

  1. Inside Candle Patterns

An inside candlestick pattern gets formed only when a share has traded between the previous days and low prices. The inside candle pattern is a regular pattern seen in the financial market. It showcases the short term sentiment of the market before moving into a long term move into the market.

  1. Outside Candle Pattern

This is a pattern widely used by Forex traders and they tend to depict the sentiments of the market and the price prediction of securities and the direction in which it will head. There are two kinds of outside candlestick patterns. Bullish candlestick pattern in which the buying pressure exceeds the selling pressure in the market and a bearish candlestick pattern in which the selling pressure outweighs the buying pressure in the market.

  1. Narrow Range

A sideways trading usually happens within a narrow range in which the difference between the highest range and the lowest range is not much. The look back period for this period is 7 days which means the highest or the lowest price range will be for the last seven days. The breakout or breakdown of the NR7 candle indicates a bearish or bullish market.

To understand the price action which plays out in the market to know the trading pattern in the market it is important to have a good guide who can teach the new investor to scan through the different charts and to learn how to trade in them. In Chennai Stock Market Profile has a good name and is known for its informative online courses in stock market trading. To know more about their Share market courses in Share Market Profile in Chennai visit our website: https://www.sharemarketprofile.com/

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