Learn More In Depth About Different Types Of Candlesticks
Today we are going to teach you how to read specific candlesticks. Let’s look at hammer candlestick and shooting star candlestick.
A hammer candlestick looks like a hammer with a square box up at top and a long lower shadow following it. There are two types of hammer candlesticks, both in red and green. The green hammer represents a interval time where the bottom part of the square is the opening price and the top part is the closing price of that specific time interval. Then there’s the red hammer candlestick where the top part of the square box is the opening price and the bottom part is the closing price.
On the contrary, the shooting star candlestick is just an upside down hammer candlestick. The shooting start candlestick also has two states, red or green. In a red shooting star the top of the box is the opening price while the bottom is the closing price. In the green version of a shooting star the top portion of the box is the closing price while the bottom is the opening price.
Another special type of candlestick is called a doji candlestick. To determine if a candlestick is a doji, the opening and closing price would be very close to one another or be on the same level. Doji can be helpful because it can potentially indicate a reversal of stock patterns.
It is important to note that what matters is to understand meanings and potential behaviors of various candlesticks, rather than remember the names.
Let’s look at some real-life examples.
As we can see, this hammer shown up at the end of the down trend. This can be seen as a reversal of the stock pattern and has potential of rising once again.
Looking at this candlestick chart, the hammer candlestick is shown at the end of an small downward trend. Which indicated that there was a reversal and the price of the stock rose about 3 dollars above it.
You shouldn’t make decision based on one specific candlestick, for example in this image above there is a shooting star candlestick that indicates that the stock price is falling. Then in the next time interval the stock price went up 5+ dollars. Using other indicators like MACD, Bollinger Band, Moving Average, Simple Moving Average, with the knowledge of candle stocks charts can definitely help you understand the patterns and trends in a stock chart.
Take some time and look at a companies stock history and review the chart in candlestick form. Getting comfortable with reading candlestick charts will definitely benefit you as a trader. By understanding at what time period investors are selling more, or buying more can influence your decision in your trades.
