1. Candlestick Recap
Remember from beginner lessons: each candlestick shows Open, High, Low, Close (OHLC) for a period. Patterns give clues about market psychology.
2. Reversal Patterns
- Engulfing Pattern: A small candle followed by a larger candle that engulfs it; signals strong reversal.
- Doji: Open and close are almost equal; shows indecision and potential trend flip.
- Hammer & Hanging Man: Long lower shadow; hammer in a downtrend signals bullish reversal, hanging man in an uptrend signals bearish.
3. Continuation Patterns
- Rising Three Methods: Small candles within a larger trend candle; trend likely continues.
- Falling Three Methods: Similar structure in downtrend; confirms continuation.
4. Trading Signals
Combine candlestick patterns with support/resistance levels, trendlines, and indicators to validate entries and exits.
Key Takeaways
- Advanced candlestick patterns improve timing for entries/exits.
- Reversal patterns warn of potential trend change; continuation patterns confirm existing trend.
- Always use patterns in context with trend and market structure.