Candlestick patterns are the backbone of technical analysis, helping traders understand market sentiment and make informed decisions. There are various types of candlestick patterns and here we speak about the single candlestick patterns. A single candlestick pattern represents the price action of an asset within one-time frame, such as an hour, a day, or a week. Each candle tells a story of how buyers and sellers interacted during that period. To learn more about the component of candlestick read the article linked here.
Types of Single Candlestick Pattern
Doji
The opening and closing prices are almost identical, forming a small or non-existent body. Indecision in the market. Neither buyers nor sellers have control, signaling a potential reversal. You can easily spot Doji patterns like a plus sign or a cross sign.
Hammer
This is a pattern that shows a small body at the top, with a long lower wick. Found at the bottom of a downtrend, the hammer shows that sellers pushed prices lower, but buyers regained control, indicating a reversal. One can identify a hammer candlestick pattern which would look like a ‘T’ sign where the body is at the top and a longer wick at the bottom.
Shooting Star
This is a pattern that shows a small body at the bottom, with a long upper wick. Appears at the top of an uptrend, signaling that buyers tried to push the price higher but sellers took over, indicating a potential reversal. Usually the next candle post this pattern is what traders will look for to solidify the pattern’s occurrence. While this pattern doesn’t guarantee a reversal, it surely indicates caution to traders to wait and move.
Spinning Top
This is a pattern that shows a small body with long upper and lower wicks. This indicates indecisiveness in terms of market direction and is often seen in periods of consolidation.
Single candlestick patterns are easy to interpret and provide quick insights into market behavior. They’re the building blocks for more complex patterns and are invaluable for spotting trend reversals or continuations.
Single candlestick patterns are simple yet powerful tools for understanding price action. By observing and practicing, you can develop the ability to read market sentiment and improve your trading decisions.