What is Candlestick?
Candlestick is a representation of an asset’s price during a given period.
In Expert Option, you can choose between 5 seconds and 1 minute period within which a candlestick will form. After the end of that specified period, another candlestick will begin to form, and the process continues.
There are basically two Candlestick types – Bullish Candlesticks and Bearish Candlesticks.
In a Bullish Candlestick, the closing price is higher than the Opening price while in a Bearish Candlestick, the closing price is lower than the opening price.
A Candlestick has two parts – A body and two tails or shadows. Note that the tails may not always be present in a candlestick. Sometimes a candlestick will have two tails, one tail or no tail at all.
The body represents the opening and closing prices. The ends of the two tails represent the highest and lowest prices within the period of the candlestick formation.
To be more precise;
- Bullish candlestick (white in Expert Option) – The lower end of the body represents the opening price while the upper end represents the closing price. The end of the upper tail represents the highest price while that of the lower tail represents the lowest price.
- Bearish candlestick (Blue in Expert Option) – The upper end of the body represents the opening price while the lower end the closing price. The end of the upper tail represents the highest price while that of the lower tail represents the lowest price.
- The body – Represents opening and closing prices.
- The tails – Show the highest and lowest prices during the specific period.
- Colored part – Shows the direction of the price movement. In Expert Option, a white body shows a rising price while a blue body shows a falling price.
Candlesticks form specific patterns that traders can recognize and utilize for profitable trading.
Some patterns will identify buying opportunities as others identify Selling opportunities. Better still, other candlestick patterns will show market indecision and so warn traders from entering the markets.
Today we will discuss very common tradable Candlestick patterns which you can identify on Expert Option Charts and ace the markets!!
Only ensure you read this article to the end to miss no detail.
Common Bullish Candlestick Patterns.
Mostly, these patterns occur after a price downtrend to hint a trend reversal/point of Support.
If you identify them, then you should consider opening a Buy position!!
- Hammer– A white candlestick formed by a short body and a long lower tail. Formed at the end of a downtrend. It shows that though there has been a selling pressure, a strong buying pressure is about to bring the price back up. Consider Buying!!
Hammer candlestick on expert Option
- Inverse hammer– A white candlestick whose upper tail is long with only a very short lower tail. It is an inverted version of the first candlestick pattern, the Hammer. It shows that there was a buying pressure which was intercepted by a selling pressure which was not strong enough for the price to continue falling. Therefore the price will rise. Will you not Buy?
Inverse Hammer on Expert Option
- Bullish engulfing– A pattern formed of two candlesticks. A short blue candle that is completely engulfed or covered by a larger white candle. This is a sign that the price will potentially rise. Does that not prompt you to Buy?
Bullish engulfing candles on Expert Option
- Piercing line– This is a two-candlestick pattern. A long blue candle is followed by a long white candle. There is a significant gap down between the blue candlestick’s closing price and the white candlestick’s opening price. This will hint to a strong buying pressure. This is because the price will be pushed to or above the mid-price of the blue candlestick.
piercing line pattern
- Morning star– It is a beacon of hope in a downtrend, hence the name. This is a three candlestick pattern. One short-bodied candle between a long blue and a long white candlestick. It shows that the selling pressure of the previous period is reducing and price rise is around the corner.
- Three white soldiers– As the name suggests, this is a three candlestick pattern. Three consecutive white candles with small wicks. They open progressively higher than the previous, whispering “Buy” to your ears!!
Common Bearish Candlestick patterns.
These patterns usually form after an Uptrend to hint a trend reversal/point of Resistance. Once you identify them, consider opening a Sell position.
- Hanging man– The bearish equivalent of the Hammer occurring at the end of an Uptrend. A blue candlestick with a short body and a long lower tail. It shows that there was a significant sell-off during the uptrend but the buyers were able to stabilize the trend. That significant sell-off is a sign that the buyers are losing control of the market. What then, do you expect to happen next? You will do well to Sell!!
Hanging man candlestick
- Shooting star– The bearish equivalent of inverse hammer formed at the end of an Uptrend. A blue candlestick whose upper tail is long with only a short lower tail. Usually, the price will rush higher on opening before closing at a price just below the opening price like a star falling to the ground. Consider a Sell!!
- Bearish engulfing– A two candlestick pattern at the end of an Uptrend. The first candlestick has a small white body and is engulfed or covered by a long blue candle. This is a sign of a peak and a looming downtrend. The lower the blue candle goes, the stronger the trend is likely to be!! Sell.
- Evening star– Bearish equivalent of the Morning star occurring at the end of an Uptrend. A short-bodied candle is trapped between a long white and a long blue candle. It shows trend reversal from an uptrend to a downtrend. A very strong downtrend is likely to occur if the blue candle moves lower than the first white candle!!
- Three black crows– Three consecutive blue candlesticks with short or no tails. Each opens at the same price as the previous but each close is pushed lower and lower. This indicates the start of a downtrend. Sell!!
Three black crows
- Dark cloud cover– A two candlestick pattern. A blue candlestick opens above the previous white body and closes below its midpoint. It signals that the selling pressure has taken over the market, pushing the price sharply lower. If the tails of the blue candle are short, it hints a strong downtrend.
Dark cloud cover candlestick pattern
This the list of common tradable candlestick patterns in Expert Option.
There are other candlestick patterns that suggest market indecision which may not be important to go into because they are not tradable!!
Make use of the above tradable candlestick patterns in Expert Option.
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