Commander in Pips: Ok, we've studied a very large part, dedicated to Japanese candlesticks, so I offer to make some summary and table to consolidate all the patterns you’ve studied into one place.
Commander in Pips:
Pipruit: Good idea, Sir.
1. Any candlestick is based on four prices of trading period – open, high, low and close;
2. The thick part of candlestick is called the “Body” and it could be hollow or filled.
3. If close price is above the open one, i.e. price increases during this trading session – the candle has a hollow body (white or green, as a rule);
4. If close price is below the open one, i.e. price decreases during this trading session – the candle has a filled body (black or red, as a rule);
5. Thin lines, that are poking out from the body up and down call “Shadows”. They point to the high price (upper shadow) and the low price (lower shadow) of the trading period;
6. The difference between the top of upper shadow and bottom of lower shadow shows the trading range of this period;
7. Candles could have different bodies – long or short, or absence of body at all. Long bodies tell about strong activity either buyers (long white body) or sellers (long black bodies). Small bodies tell about shallow activity of participants in this trading period. A candle could have no body, if the open price equals the close price. This candle is called a “Doji”.
8. Candles could form patterns that consist of 1-3 candles and could carry “Reversal”, “Continuation” or “Caution” functions. To look at patterns – just look at the table at the end of this lesson.
Candlestick Patterns properties:
1. Do not use any pattern as a single tool for trading. Use them in context and together with other tools, for example support/resistance levels. Because it’s much safer!
2. Pattern is treated as formed, when market totally completed it – i.e. after close of trading session. Do not try to anticipate the patterns.
3. Appearing of any pattern does not mean that we have to buy or sell blindly. If it was so simple, then even monkeys could become billionaires. We need further confirmation from the market by following price action.
4. Most patterns are treated as triggered by the market if the market closes above/below of high/low of the pattern on the next trading session according (i.e. confirming) with the pattern’s direction.
5. Most patterns are treated as failed if the market closes above/below of high/low of the pattern on the next trading session against (i.e. disaffirm) the pattern’s direction.
6. Be careful with trading so-called “not perfect” or “insufficient” patterns.
7. Even appearing of some perfect pattern does not mean that market will act accordingly. Patterns fail often. That’s why we have points 1 and 3 here.
And here is the table: