- What is the Pattern of Candlestick in the Trading World?
The Pattern of Candlestick was first used since the 17th century in Japan to calculate the price
of rice. When in 1850 Steve Nison popularized the method of analysing price
movements using this candlestick pattern. By using this candlestick pattern you
can estimate price movements where the market will move next. The pattern of
using candlesticks is divided into three, single formation, dual formation and
triple formation candle.
Each of these
patterns have different meanings so that each pattern is called different from
its own function. There are reversal/reversal patterns, trend forwarding, and
others. This candlestick is the conclusion of the data that is in the candlestick. So for example, you see 1 H4 candlestick bar that is the conclusion of the price
movement for 4 hours.
Candlestick form
Candlesticks
have a unique shape like a candle. There are a body candle and a shadow at the top
and bottom. The shadow on the candle can be used to see the market sentiment. The
shadow will be a mirror of price to find out the strength of the buyer or
seller that will dominate the market.
The body in
this candle defines the opening price and closing price at a certain time. At
certain hours if the opening price is higher than the closing price on a candle
it will become a bearish candlestick and vice versa.
If you are
going to use a Fibonacci indicator or draw a trend, this shadow will become its
foundation. Shadow in a candlestick has an important role so that the withdrawal
of an indicator or conclusion must use and pay attention to the shadow on the
candlestick.
- Examples of Candle movements
Examples of price
movements in 1 hour
To understand
the process of forming a candle can be seen in the order below with reference
to the candle image above.
- A bullish candlestick is formed early when starting opening price.
- Prices drop to lower price.
- After reaching the lower price then the price rises to form a lower shadow to high price.
- Then the price drops slightly to the closing price so it forms a higher shadow.
- After the process for one hour ends, the bullish candlestick will be formed.
This is just an example of a
simple candle movement, different things might happen on the market.
- Bullish and Bearish on the market
Bullish VS Bearish on
the market
Bullish is the term used for price increases that occur in the market. The bullish condition
is illustrated by a bull. Bearish is the term used for price declines that occur
in the market. The bearish condition is symbolized by the bear (bear). Terms
like this can be used both in the stock market, commodity markets or money
markets.
Generally, the
colours on this candlestick are green for Bullish and Red for bearish. You can
configure it yourself to determine the right colour according to your trading
style.
- Use of candlesticks for trade
In drawing
conclusions when trading using candlesticks you must use the help of other
indicators. Drawing conclusions should not only use candlestick patterns
because market behaviour is volatile and difficult to predict.
For the use of
candlestick patterns, it should be at least highly recommended for the H1
timeframe. You better use a candlestick pattern on a large timeframe on H4 For
example. If you see a candlestick indicator on a small timeframe, it will cause
a lot of false signals so you will be wrong in making further market price predictions.are
