Candlestick pattern originated in Japan within the 1700s,
When a Japanese man named Homma discovered that, while there was a link between price and therefore the supply and demand of rice.
Candlesticks show that emotion by visually representing the dimensions of price moves with different colors.
Today we are going to talk about
Why the candlestick pattern is so important?
Stay tuned 🙂
Hey traders, are very warm welcome to you okay
So counts tick charts, bar charts really as well anything where we’re taking information about the high the low the open the close of the day.
Why Candlestick Pattern is So Important?
First always a witness was no but let’s just word for it literally 30 seconds
A week is basically the point of the candle which is showing us the high or the low
So the body of the candle shows the open of the close
If it’s a Red Candle it means the down Dave’s closed below be open
The upside wick is showing us the high of the day and the downside wick is showing us the low of the day
And we could get candles that are pretty neutral
You know with a little bit like that’s the highest, the low it’s open that’s the close
Let’s talk about why this Candlestick Pattern Chart is so important?
Guys, many most experienced traders said that candlestick pattern is probably one of the things that have been the most profitable type of pattern for them over the years
Now know put in perspective they are not just trading candlestick pattern chart but what they actually mean let’s drill into that
Because this is what it’s all about
When we see a candlestick pattern
Candlestick pattern generally,
Not always, but we’re again we’re gonna have to put them into the context of where we see them
Are telling us an Intraday change in sentiment.
Now I’m talking about daily charts
Here, It also works on 15 minutes, 5 minutes any timeframe you like
One-minute notes and my obviously as you go down the timeframes are gonna be less valuable
But let’s talk about daily,
For now, what a wick is telling us is it’s a change in sentiment intraday.
So, Let’s take an example here
This is basically what’s happened we’ve got the open (See in the image below)
we’ve pushed up which is a high
we’ve pushed down through the open and we closed
so we have had this
Now the bigger this candle relative to the others the more interested traders are in this
They love to see this because it means that there is a supply-demand shift,
A significant shift in the middle of the day
It means that it’s urgent,
Is some urgency there within a small window a few hours whatever it is
Whatever’s happened has changed the sentiment of that market
That’s why these are some of the most profitable things you can do
We call it Candlestick Pattern Chart.
But it’s this shift in supply-demand in the balance
Why is that so important?
That’s what we’re looking for
If we’re buying a pullback we’re still looking for that shift in supply-demand in balance
If we’re selling a resistance level we’re looking for that shift from demand to supply coming in
Whatever trade we’re making we’re always looking for the shift in supply-demand imbalance or a continuation of something.
Now some of us might just buy highs in for trends flying, some like to look for turning points still jump on trends trying to finesse it a little bit
Which is why these things are so good
So let’s look at what causes them and then put them into some context
Ther are some causes which lead the market at that particular time, we will talk about them one by one
Obviously we come out in the middle of the day.
It’s the stock and it changes the whole game.
We get the candlestick pattern to the upside it’s left its little footprint.
On the daily chart, it’s gone into fresh highs and the whole thing has changed people’s perception of it has changed
Because the news is the negative or positive depending on which the side we’ve got it
Number two is the Sentiment
In other words, this might not be news based
It could just be that people have literally changed their perception of the market
Now, why would that happen? what’s on piscina to change the perception in the market?
If you imagine a market coming up over a resistance level, okay
Three things are going to happen there it’s
- Gonna hold there
- It’s gonna carry on or
- It’s going to reject
3. Supply & Demand
Very often as you will know,
From seeing your charts yourself or you can Currency Chart, Stock Charts, Indexes, Kryptos or whatever it
Maybe you often see a significant rejection of those levels because people are
One waiting to sell as we come above that level whoever it may be and
Buyers are unwilling to buy any higher that’s why we get this supply-demand as S&D.
Supplied them on shift because it moves up from demand demand demand
All of a sudden the buyers are backing off, I don’t buy anymore that’s considered too pricey for them for whatever reason.
That’s their own bit of their own business perhaps sellers as well I see that as good value and start hitting it.
So we get that as we talked about the full supply-demand imbalance changes where you’ve got buyers backing off and sellers coming on that’s when you get extreme and we get the extreme reversal.
And the momentum makes it carries it
We get to close below the open or we undo all the work from the high
The Bulls are caught out with it and then we get a drive to the downside.
Sometimes it’s not obvious why this happens but it happens and it’s worth paying attention to.
The most important thing we want to see is we want to see
- Volume on the day
- A key level or
- Some sort of NEWS catalyst
So the bigger volume on the day and it is a relative volume by the way
So the volume you’ve got your volume, to be honest chugging away, chugging away
All of a sudden you get good volume and you get a wick whether you’re upside or downside
And again let’s put in perspective a second that is interesting,
That is worth looking at
Because it means a lot of people are now shifting their focus or shifting their attitude towards that a market
Whether it’s in a positive way or a negative way
And what it’s worth
A good trader looked at it because when a lot of people are doing something.
If we can get on it before the rest of the crowd get involved,
So we make our money.
So these are the kind of things we need to look for,
Your Volume, Big one key level nice to see that break within oversee the structure or the trade and use a nice little catalyst or NEWS.
Looking for the sentiment, looking for the supply-demand shift
But wicks they sound so boring and so ease
Like it’s a wick, it’s a wick
But on we drill into it like this,
We can see why it’s so good, it’s so useful for us.
When we’re trading Intraday change in supply-demand balance or imbalance shift is so so powerful for us as traders.
So, Guys, that’s all for today.
Let me know your thoughts in the comment section below.
Tell me what you have learned from this blog about the candlestick pattern.
Till next time… Goodbye 🙂
P.S. If you liked the post don’t forget to let me know in the comments. Also if you want me to cover something more on this topic let me know that too.