Candlesticks Formations - Day Trading Candlesticks Reversal Patterns
Candlesticks were invented and used by the Japanese to trade rice in the 17th century. A US version was later structured by Charles Dow. Candlesticks are charted with the elements open, high, low and close values over a chosen time period.
 
Candlestick Reversal Patterns Bullish - Reversal Patterns Bearish
Candlestick Reversal Patterns have been used by day traders for a long time because they ususally give clear indication of a trend reversal which means time to get out of a trade or time to get in.
Candlesticks - Day Trading Formations
Doji - Dragon Fly and Gravestone Doji
A doji is a candlestick with no real body shaped like a cross. A doji indicating minimal change and low buying and selling action.
Hammer
The hammer is an indication of a possible end of a bearish trend and the reversal into a bullish trend.
Inverted Hammer
The inverted hammer is a bullish signal and an indication of a possible end of a bearish trend. Hammers and inverted hammers give similar signals but a hammer represents a significantly stronger signal.
Spinning Top
Candlesticks with a long upper shadow, long lower shadow and small real body are called spinning tops. The long shadow represents a possible reversal. spinning tops represent indecision.
A spinning top is a trend reversal signal.
Shooting Star
A Shooting star pattern is a candlestick shape similar to the hammer, but the picture upside down. The shooting star is an indication of a likely end of a bullish trend and the reversal into a bearish trend.
Hanging Man
The hanging man is a bearish reversal pattern that often marks a high point of the day and point of resistance. A hanging man signals that sellers are entering in a greater force than buyers.
Trading Psychology
1. Each candlestick pattern shows an indication of possible trend reversal. Learn to recognize these candlestick patterns and formations so that you don't get caught out or miss a great entry point when day trading.
2. Long green candlesticks indicate that the Bulls are in control and buyers are far greater than sellers.
3. Long Red candlesticks indicate that the Bears are in control and sellers are far greater than buyers.
4. Small candlesticks indicate that neither Bulls or bears are in control. There is not much buying or selling.
5. A long lower shadow indicates that the Bears (sellers) were greater but the bears (buyers ) came back to overcome the selling pressure.
6. A long upper shadow indicates that the Bulls (buyers) were greater but the bears (sellers) made an impressive comeback.
7. Long upper and lower shadows on the same candlestick indicates that both Bears and Bulls had control but they were even in the end.
Other Resources: http://www.candlesticker.com
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