Candle patterns is a charting tool that helps identify important candlestick chart patterns for traders. Our charting system will highlight candlestick patterns based on your selected criteria to help you more clearly identify potential trading opportunities and changes in trend.
Candle Patterns in Practice
Candle patterns should always be looked at in the context of the overall trend. In some cases, you may see a highlighted candle pattern which would invalidated by specific trading rules related to that pattern. Care should be taken to review all highlighted candle patterns and validate the trading signals.
The Chart above gives two good examples of how one would use and validate patterns. The first pattern labeled HM for Hanging Man is located near the top of a recent uptrend which helps to validate the pattern. Further confirmation comes when the stock prices fail to make a new high and eventually break down. A trader would use the high formed from the Hanging Man candle as a potential stop price in the event they entered into a short position or used options to profit from the fall in the stock's price.
The second pattern, a bearish doji labeled D-, is visible after the stock had already begun a price reversal. A doji pattern is created when the open and closing price of the stock are virtually the same creating a candle that has virtually no body. This candle would be considered bearish if identified at the top of the most recent short term uptrend. While activity after this pattern was in fact bearish, the pattern itself would be considered invalid because of the location within the trend.
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The analytical tools described in this article are for information purposes only and their use does not guarantee a profit. None of the information provided should be considered a recommendation or endorsement of any specific investment, tool or strategy. The choice to engage in a specific investment, tool or strategy should be based solely on your research and evaluation of risks involved, your financial circumstances and investment objectives. Securities are subject to market fluctuation and may lose value. Market volatility, volume, and system availability may impact account access and trade execution.