What are single candlestick patterns? How to trade them?
Single candlestick patterns are a popular tool used in technical analysis to predict future price movements in financial markets. These patterns are formed by a single candlestick and can provide insight into the sentiment of market participants.
There are several single candlestick patterns that are commonly used in technical analysis: We will look into hammer and shooting star in this blog.
Hammer
One of the most well-known single candlestick patterns is the “hammer” pattern. This pattern forms when the market opens at a high price, falls during the trading session, and then closes near the opening price. The long lower tail of the candlestick indicates that bears (sellers) were pushing prices down during the session, but bulls (buyers) ultimately stepped in to bring prices back up. The hammer pattern is considered a bullish reversal pattern, indicating that a downtrend may be coming to an end and that prices are likely to rise in the future.
Shooting Star
Other popular single candlestick pattern is the “shooting star” pattern. This pattern forms when the market opens at a low price, rises during the trading session, and then closes near the opening price. The long upper tail of the candlestick indicates that bulls (buyers) were pushing prices up during the session, but bears (sellers) ultimately stepped in to bring prices back down. The shooting star pattern is considered a bearish reversal pattern, indicating that an uptrend may be coming to an end and that prices are likely to fall in the future.
It’s important to remember that these patterns should be used in conjunction with other forms of technical analysis and fundamental analysis to make more accurate predictions. Also, it’s important to look for confirmation of these patterns through the formation of other patterns or indicators.
In other blogs we will look into most common single candlestick patterns like Hammer and Shooting star, Marubozu, spinning top, Doji and Hanging Man.