Simple patterns
In financial technical analysis, a candlestick pattern is a movement in prices shown graphically on a candlestick chart that some believe can predict a particular market movement.
The recognition of the pattern is subjective and programs that are used for charting have to rely on predefined rules to match the pattern.
There are 42 recognized patterns that can be split into simple and complex patterns.
From "16 candlestick patterns every trader should know". Retrieved 4 July 2020
Author Thomas Bulkowski takes an in-depth look at 103 candlestick formations, from identification guidelines and statistical analysis of their behaviour to detailed trading tactics.
He makes important discoveries and statistical summaries, as well as a glossary of relevant terms and a visual index to make candlestick identification easy.
Candlestick charts show that emotion by visually representing the size of price moves with different colors.
Traders use the candlesticks to make trading decisions based on regularly occurring patterns that help forecast the short-term direction of the price.
Is it reliablie?
Candlestick patterns can be useful tools for analyzing price trends and predicting future price movements, but their reliability can vary depending on a number of factors.
One factor to consider is the timeframe being analyzed. Candlestick patterns may be more reliable on longer timeframes, such as daily or weekly charts, where they can help identify long-term trends and potential support and resistance levels.
Another factor to consider is the market conditions. Candlestick patterns may be less reliable in highly volatile or unpredictable markets, as sudden news or events can quickly change the direction of price movements.
It's also important to keep in mind that candlestick patterns should not be relied on exclusively for making trading decisions. They should be used in conjunction with other technical and fundamental analysis tools, as well as risk management strategies.
Overall, while candlestick patterns can be a useful part of a trader's toolkit, it's important to approach them with a critical and discerning eye and to consider them within the broader context of market conditions and other factors affecting price movements.
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