In using Technical Analysis, many traders choose Candlestick charts (candle charts) to display prices. This type of chart was invented by Munehisa Homma, a rice trader in Japan in the 18th century. Candlesticks are generally used for short-term trading, so they are more suitable for use by robot trade. There are lots of candlestick patterns. Well, some of these patterns are patterns that tend to be more profitable than others. The following article will discuss basic candlestick patterns, and the 4 most potentially profitable candlestick patterns. Also discussed how to use it.
Basic Candlestick Shapes
The shape of the candlestick displays the opening price, closing price, high price and low price. The shape of the candlestick looks like a candle. There is a body (body) and axis (shadow / wick).
Candlesticks use two colors, for example a combination of blue/green and red or a combination of white and black.
Blue/green candlestick indicates the closing price is higher than the opening price (price is rising). While the red / black color indicates the closing price is lower than the opening price (the price is falling).
There are many candle patterns, but from my personal observation there are several candle patterns that are potentially more profitable than others, namely:
1. Marubozu
This Marubozu candle pattern occurs when there is a full body without shadow. This form indicates a very confident market. Usually the trend that occurs will continue. There are two types of Marubozu, namely Marubozu White (bullish) and Marubozu Black (bearish).
2. Doji
This Doji candle pattern is the most frequent and easiest to find reversal pattern, namely the type of candlestick where the opening price is the same or almost the same as the closing price, so that only a thin line is seen in the middle of the shadow. Doji usually indicate a change in trend, either bullish or bearish. So you need to be alert if you find a Doji.
The existence of a Doji candle gives the possibility of a reversal. The longer the doji’s tail, the stronger the chance of a reversal.
3. Hammer
The Hammer candle pattern is a candle shaped like a hammer. The hallmark is that there is only one shadow. Usually an indication of a reversal. The opposite of the Hammer candle pattern is the Inverted Hammer. This pattern is also usually an indication of a reversal.
4. Engulfing
The Engulfing candle pattern is an indication of a fairly strong reversal. In English, engulfing means to cover. The characteristics of this pattern are indicated by a short candle followed by a longer candle so that the high covers the previous candle. There are two types of Engulfing patterns, namely Bullish Engulfing (potential for an up reversal) and Bearish Engulfing (potential for a down reversal).
In Bullish Engulfing, the rising candle covers the down candle. Whereas in Bearish Engulfing the opposite occurs, the descending candle covers the rising candle.
Those are the 4 most potentially profitable candlestick patterns. The selection of the candlestick pattern is based on the experience and subjectivity of the author. This candlestick pattern is not necessarily suitable for you. So you have to try it yourself and determine which one is suitable for trading.