Technical analysis works on a simple rule – History tends to repeat itself.  Technical analysis in itself is a set of rules and regulations developed after watching how the market responded to a specific event or series of candlestick formations. 

To be a master in technical analysis one needs to have a strong knowledge of specific candlestick patterns and their importance. One has to look through various aspects like trend direction and strength of trend etc to take a good trade, I have talked more about trend trading in a special blog post. 

Be flexible with patterns , there will always be a little difference between the pattern on textbook and the one on your screen.

Single candlestick patterns

These candlestick patterns are formed by a single type of candle or say this is a specific single candlestick you look for to enter into trade. While we look for such candlestick it is important that the candle formed has a good length as length signifies strength. Short candlesticks should be avoided. 

Spinning top

A spinning top is a candlestick that tells about the market condition. A trader can use a spinning top to position himself in the market.

  1. The candle size should be small that is the open and close should be nearer to one another. 
  2. Irrespective of color.
  3. This candle signifies Indecision in the market.
spinning top

bullish
marubuzo

A bullish marubuzo signifies a strong bullish movement.  The speciality of a Marubuzo is it can form anywhere on the chart irrespective of the trend. 

A marubuzo generally has no wicks. You can spot a marubuzo by checking if it’s [OPEN=LOW – CLOSE = HIGH].

Bearish Marubuzo

A bearish marubuzo signifies a strong bullish movement.  The specialty of a Marubuzo is it can form anywhere on the chart irrespective of the trend. 

A marubuzo generally has no wicks and [OPEM=HIGH and CLOSE=LOW]

Paper Umbrella

Paper Umbrella is a Single candlestick with a long wick with a small upper body. 

HAMMER

HANGING MAN

A paper umbrella appearing at the bottom of a downtrend is called “HAMMER”

A Paper Umbrella appearing at the top of an uptrend is known as a “HANGING MAN”.

THE HAMMER

  1. Small Body with a wick below
  2. Should form at the end of a downtrend.
  3. Suggests end of a downtrend 
  4. Look for buying opportunities.

The Hanging Man

  1. Small Body with a wick below
  2. Should form at the end of an uptrend.
  3. Suggests end of an uptrend 
  4. Look for selling opportunities.

Shooting Star

A shooting star is a powerful single candlestick pattern. Popular amongst traders. 

  1. It has a long upper shadow.
  2. The length of the shadow is twice the length of the upper body. 
  3. The color of the candlestick does not matter.
  4. The prior trend should be bullish.
  5. Extremely bearish pattern.

I would like to suggest to you that these patterns are over a day time frame and hence will take a lot of time to be spotted. While using these patterns in a small timeframe it is important that you check for rigid support and resistance zones. Spotting a shooting star at a resistance zone adds confluence to your trade. hence look for such various factors before placing a trade.

Now that we are done with single candlestick patterns let’s look into some multi candle patterns.