Top 10 Candlestick Patterns

Top 10 Candlestick Patterns

There are hundreds, if not thousands, of candlestick patterns that have been identified and used by investors to enhance trading performance. Candlestick indicators are best used in conjunction with other analytical tools in order to produce optimum performance. Here are the top 10 candlestick patterns which should be considered by all traders for their investment activities are the following:

The top 10 candlestick patterns are the patterns that are found most often and have proven to be the mot reliable.

Top 10 Candlestick PatternsThe top 10 candlestick patterns #1 Dark Cloud Cover:  This is a two-day formation which arises when the candlestick formed on the first day has a long white body followed by an opposite colored candlestick, which opened at a new high only to close below is the midpoint of the previous day’s trading.  This pattern is considered a bearish reversal signal.

 

Top 10 Candlestick PatternsThe top 10 candlestick patterns #2 – Doji:  When the opening and closing price are essentially the same, the candlestick formed resembles a plus sign, cross, or inverted cross and is referred to as Doji.  It represents indecision on the part of the market, and is interpreted by traders that a turning point is imminent.

 

Top 10 Candlestick PatternsThe top 10 candlestick patterns #3 – Engulfing Pattern: This is a two-day pattern where the first day’s body is smaller than the subsequent candlestick, and they are both of opposite colors.  This pattern is considered bearish when it appears at the end of an uptrend and bullish when it occurs in a down trending market.

Top 10 Candlestick PatternsThe top 10 candlestick patterns #4 – Evening Star: Commonly regarded as a bearish reversal pattern, this three-day pattern consists of a long white body, followed by a smaller gap up candlestick, with the third and final day closing below the midpoint of the first day.

As you can see the top 10 candlestick patterns are easy to recognize and understand. Try and look at the patterns and understand them as opposed to memorizing them. Meaning try to understand why price is likely to follow the pattern. If you want a fasttrack into candlestick pattern trading, study theses top 10 candlestick patterns and you will be well on your way to applying the most effective candlestick patterns to your trading.

For example the “morning star doji” – price is coming down… Price gaps down a little and then demonstrates a “slowing” of this falling trend… The next day it gaps up and shows strngth.  This is bullish

Top 10 Candlestick Patterns

Top 10 Candlestick PatternsThe top 10 candlestick patterns #5Hammer: When trading occurs significantly below the open, but ends well above the low and closes as its high, the candlestick formed has only one tail below its body.  When this formation occurs during a downtrend, it often signals a reversal.

Top 10 Candlestick PatternsThe top 10 candlestick patterns #6 – Hanging Man:  Identical to the Hammer, this candlestick pattern occurs during an uptrend, and signals a continuation of the price movement.

Top 10 Candlestick PatternsThe top 10 candlestick patterns #7 – Harami: This is a simple two day candlestick pattern that has a relatively small body on the second day that is completely surpassed on both sides by the previous day’s candlestick and is always of the opposite color. It usually occurs during a minor correction in a bear or bull market and signals that this temporary uptrend or downtrend is reaching an end, and the underlying trend will continue.  It is especially considered a strong indicator when it appears together with low trading volume.

Top 10 Candlestick PatternsThe top 10 candlestick patterns #8 – Morning Star: This formation is considered a three day bullish reversal pattern that consists of a long bodied black first day, a short gap down second day, followed by a third long white bodied candle, which closes above the midpoint of the first day.

Top 10 Candlestick PatternsThe top 10 candlestick patterns #9 – Piercing Line: This is a two-day formation considered to be a bullish reversal.  The first is a continuation of a downtrend with a long black body.  The second day opens at a new low, but closes above the midpoint of the previous day’s trading.

Top 10 Candlestick PatternsThe top 10 candlestick patterns #10 – Shooting Star: The opposite of the Hammer, this is a one-day formation and occurs in an uptrend.  Trading opens higher and trades much higher but prices end near the low.  This pattern is viewed as a bearish reversal.

So when it comes to understanding and applying high probability candlestick patterns to your trades, be sure and start with these top 10 candlestick patters ad they are the big money makers and the most reliable of all the patterns.

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