If you learn finance or other technical analysis tools you may know what candlestick patterns is. Let us stretch a little bit more about it in order to have a clearer definition about this pattern and the types that often you will see in the real-life observation. Firstly, knowing the history about the invention of candlestick pattern is merely important.
In the 17th century, some of the earliest trading analysis were used to track the price of commodities, focusing on the price of rice. The first inventor of a candlestick chart, as well as the credit receiver, went to Munehisa Homma. He was a rice merchant from Sakata, Japan who traded in Ojima Rice Market in Osaka during the Tokugawa Shogunate.
Then, let us have a clear understanding about candlestick patterns before we get into what are the types of it. It is a pattern which movements are shown graphically on a candlestick chart that experts believe it will predict a certain market’s movements, whether for the better or worse. It is also defined as the representative of price’s movements for a given period of time. This graph will be the viable judgmental of the feasibility of a life-cycle of a market. There are two Types of candlestick patterns which are simple pattern and complex pattern:
|Simple Patterns||Complex Patterns|
|Big Black Candle||Bearish-Harami|
|Black Body||Bearish 3-Method Formation|
|Dragonfly Doji||Bullish Harami|
|Long-legged Doji||Dark Cloud Cover|
|Inverted Hammer||Bullish 3-Method Formation|
|Long Upper Shadow||Bullish Harami Cross|
|Shooting star||Engulfing Bearish Line|
|White Body||Engulfing Bullish Line|
|Shaven Head||Evening Star|
|Big White Candle||Evening Doji Star|
|Gravestone Doji||Morning Star|
|Hanging Man||On Neckline|
|Inverted Black Hammer||Three Back Crows|
|Marubozu||Three With Soldiers|
This is how you read the pattern. Assume that the opening price is above the closing price filled with red or black color in the body of the candle. The filled or hollow portion on the pattern is known as the body. This body’s proportion can be long, normal and short depending on its proportion on the line above or below it. The lines of the opening and closing price which are located on the above and below are known as tails, shadows or wicks. They represent the level (high or low) the price range within a certain time of a given period, however not all of the charts have tails.