Despite over 100 unique candlestick patterns that can be observed using CAPEX trading chart tools, there are a select few that are considered to be especially popular. This is because they are either easy to spot, provide extensive trading information, or have a high rate of success. As always, these patterns are not guaranteed, despite their popularity, and the market can always defy the signals very quickly. If you want to learn to read candlestick charts, it’s a good idea to start with some popular favourites at CAPEX.
Hammer
When an instrument trades at a remarkably lower than its opening price but then rallies within the period to a closing value near to the opening price. The pattern is remarkable for a long lower shadow that is a minimum of twice the size of the real body. The hammer indicates a market that is in the decline and trying to determine a bottom. A price rise seen in the hammer pattern is the indication of a possible reversal and this signal is strongest when it is followed by candlesticks in the reversal direction.
If, for example, you’re looking at a bullish hammer the following three candlesticks after the pattern need to be increasing in order to confirm the bull reversal. Hammer candlestick traders will generally enter long positions or exit short positions after a confirmation.
Experienced traders won’t just use this pattern alone – other tools such as trend analysis and technical indicators are usually used to further confirm the movement. Hammer patterns are a great place for traders to start out as the pattern appears on any time frame at CAPEX.
Three Line Strike
The Three Line Strike is a bullish reversal pattern that can be observed using CAPEX tools and is indicated by the three black candles during a downtrend. In the Three Line Strike, each of the three bars posts a lower low than the previous and the bars close near the intrabar low for the day. Now while the fourth bar opens even lower than that, it quickly reverses within a wide-range that closes higher than the first bar in the initial Three Line Strike. Essentially, the price falls before reversing past its last high point.
According to trading author Thomas Bulkowski, the Three Line Strike predicts higher prices to within an accuracy rate of 83%. Of course, the reverse of this would be a bearish Three Line Strike in which the three bars are bullish before a fourth bearish bar that closes lower than the low of the pattern. A common occurrence of the Three Line Strike in a bullish market is when the market has increased for a long period and has become overbought – traders then seek to sell off positions to prevent losses during an anticipated market pullback.
Doji
The Doji pattern is notable for the fact that candlesticks during a session open and close at the same price – or at least virtually the same price. It will appear on CAPEX trading charts like a cross since the candlestick will feature virtually nobody whatsoever and the pattern generally indicates a reversal. The Doji pattern can also look like an inverted cross or even a plus sign too. A rather neutral pattern on their own, the Doji pattern, however, features in many other trading patterns you can observe using CAPEX.
There are three types of Doji pattern and they are based on where the open and close line falls on the chart. These are known as the dragonfly, gravestone, and long-legged Doji pattern.
Since the Doji pattern indicates virtually little to no price movement, the pattern represents an equal amount of indecision in the market. Nobody is buying and nobody is selling and many technical analysts at CAPEX believe this is a signal of an imminent reversal. However, it could also indicate that either the buyers or sellers are building momentum to continue the current trend. The Doji pattern can be an effective indicator of breakouts since they often appear during periods of consolidation.
Trader Education
The best way to be a successful trader is to have as many educational resources as possible. At CAPEX, traders can access a plethora of educational content ranging from simple articles to full trading courses in the CAPEX academy. CAPEX offers a detailed IPO report on all the exciting companies going public so traders are fully up-to-date and the training videos in the CAPEX Academy will teach you how to trade them. Featured articles are published by some of the best experts in the game and cover a wide-range of financial, technology, and business topics.
