When someone becomes a trader or does research on how to trade, one of the first things they have to learn about is candlestick charts. Charts like bar and line charts are forms of illustrations that a lot of people have familiarity with, but a candlestick chart may first seem confusing to most people. Once a person becomes familiar with what candlesticks represent and how important it is to know how they work, the next step is to learn about different candlestick patterns.
The ability to recognize these patterns, especially early on during someone’s time in trading, is essential in starting off on a great foot and seeing a substantial amount of profit early.
Prices changes happen often in the trading market, so being able to predict the way these prices change before they show up on the chart will improve your trading and take it to the next level.
Candlestick Reversal Patterns
A candlestick reversal pattern, like a trend, indicates behaviors of prices and influence traders to make certain decisions. The difference is that reversal patterns can be potentially recognized before they even take place, so it is important to get familiar with these patterns and how they can improve your trading
Some primary candlestick reversal patterns that traders often use to improve their trading are the doji, hammer, engulfing, harami, kicker, piercing line, dark cloud, morning star, evening star, and shooting star. These patterns can serve as great indicators for when to buy and sell because of the bearish or bullish behavior it can display.
For example, If a bullish reversal pattern can be identified, then it tells the trader that a downward trend is most likely to happen in the near future following an upward trend. All of these reversal patterns have their own specific behaviors and indications, but recognizing them before they occur will help you identify trends and perfect your enter/exit strategy.
Learning how Japanese candlestick patterns behave as well as the different aspects of technical analysis will position you better in order to make informed decisions with the confidence you need. Reversal patterns, along with knowledge about technical analysis, show you the most optimal times to enter a trade, how to ensure the security of your profits, and when to exit a trade.