Candlestick Trader Tutorial 3 Favorite Patterns

There are many candlestick patterns but there are just several that you certainly need to learn even though you may not be a candlestick trader.

These candlestick patterns are more functional once you know what is occurring in each pattern.

Candlesticks have got to be used with other forms of technical analysis to really be useful. For example, when you see one of these candlestick patterns on the daily chart, move down to the hourly chart. Will the hourly chart concur with your perspective on the daily chart? Has the MACD gone above the 0 line? If so, then the probability of a reversal increase.



Bullish Engulfing: This is stock traders favorite candlestick pattern. This pattern consists of two candles. The initial day is a tight range candle that closes down for the day. The sellers are still in control of the stock but because it is a narrow range candle and volatility is low, the bears are not really aggressive. The second day is a broad range candle that “engulfs” the body of the first candle and closes near the top of the range. The bulls have overwhelmed the sellers (demand is greater than supply).



Bullish Kicker: The "kicker" is one utterly remarkable candlestick pattern. The trouble is that it is rarely witnessed but when it does form, it is one of the more accurate candlestick patterns you will come across. The stock is moving down for 3 or more days and the bears are definitely in control. Then, on the next day, the stock gaps open above the previous days high and close. This totally surprises the bears and forces them to cover their shorts as new traders pile in on the long side.



The Doji: The "doji" is a impartial pattern. It is almost certainly the most common candlestick pattern. The stock opens up and goes nowhere throughout the day and closes right at or near the opening price. This signals vacillation and causes investors to doubt the current trend. This can usually spark off reversals in the opposite direction.