5 Most Popular Single Candlestick Patterns
Japanese candlesticks are a tool of technical analysis based on drawing a relationship between the change in price and time. It is called Japanese candlesticks because the Japanese were the first to use them in speculating on rice. As the sideline represents the price change and the horizontal line represents the change of time – this is what constitutes a candlestick-like graph. In this article, you will learn more about basic patterns.
The Hammer model
Above you see a hammer-like model. The body of the candle is small and consists of one candle. Its lower shadow is at least twice the body of the candle. It has a very small upper shadow or no upper shadow. The longer the lower shadow is, the better.
It comes at the end of the downtrend to indicate the possibility of its reversal. The hammer shows that although there was selling pressure during the day, strong buying pressure eventually pushed the price up again.
The Hanging Man pattern
The Hanging Man pattern is similar to the Hammer in terms of the shape of the candlestick. It is a small candle body, consisting of one candle. Its lower shadow is at least twice the body of the candle, and its upper shadow is very small or non-existent.
It comes at the end of an uptrend to indicate the possibility of its reversal.
Inverted Hammer pattern
The body of the candle is small, and it consists of one candle. Its upper shadow is at least twice the body of the candle, and it has a very small or no lower shadow.
It comes at the end of the downtrend to indicate the possibility of its reversal.
The Shooting Star pattern
The shooting star pattern is similar to the hammer model in terms of shape. The body of the candle is small, and it consists of one candle. Its upper shadow is at least twice the body of the candle, and it has a very small lower shadow. The longer the upper shadow is than the body of the candle, the better.
It comes at the end of an uptrend to indicate the possibility of its reversal.
Doji pattern
It is one of the most popular single reversal candlestick patterns. The body of the candle is a line. It’s a candle with a closing price which is equal to its opening price or is slightly higher/lower.
This candle expresses confusion between buyers and sellers. The upper and lower shadows are usually small. If it comes at the end of an uptrend, it is considered a sign of weakness for the trend and an alert for the trend’s reversal from ascending to descending. If it comes in a downtrend, it is considered a sign of weakness and a warning of a reversal of the trend from downward to upward.
Next time, when you see one of these single candlestick patterns in the chart, you can make an informed decision about the possible trend moves and reversals.
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