Candlestick charting is a unique technique of charting that applies to all the markets whether you trade stocks, options, futures or forex. Candlestick charts give you at one glance the mood of the market whether the market is bullish or bearish.
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Candlestick Patterns Are Important Trend Reversal Signals
Steve Nison is considered to be an authority on candlestick charting. In the last decade, candlestick charting has become highly popular with the traders. Now many use candlestick charts in their daily trading. On the candlestick charts there are some very important candlestick patterns that can give leading indication of the trend reversal that is about to take place in the market. If you can spot these candlestick patterns accurately, you can become a highly successful trader.
A Hammer represents the bottom of the trend. It occurs at the end of the downtrend. Hammers have small bodies and long shadows. Hammers have infact long lower shadow and a small upper shadow. What a hammer reveals is that after the price of the security opened on the market, sellers drove it down further. Hammer is one of the important candlestick pattern. By the end of the day, buyers have recouped much of their losses to end the day near or at the high. No Hammer is complete without confirmation. If the price action directly after the Hammer is down, no hammer has taken place. A true Hammer cannot have its low violated by subsequent price action. Volume should also be taken into account. If the volume is heavy, the Hammer formed is genuine.
A Bearish Engulfing Patterns occurs at the end of an uptrend and marks important reversals. They are characterized by two bar formations. The first candlestick represents a small body. The second candlestick opens higher than the previous candlestick close and closes lower than the previous candlestick open, thus engulfing the previous candlestick body.
