Candlestick Patterns Discover How To Read Candle Charts At CAPEX

It’s almost impossible to successfully day trade without using candlestick patterns for technical analysis. Forming the backbone of technical analysis, traders at CAPEX need to know how to read candlestick charts to know when to execute a trade by identifying trends and reversals in price movement.

Below, we, at CAPEX, showcase all the details on using the most important trading tool you’ll ever need.

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Dedicated Webinars

traders can develop their skills even further with CAPEX webinars featuring market expert Miguel Angel Rodrigues. You can learn all about new trends, how to implement your education practically, and gain unique insights into trading strategies. CAPEX webinars are completely free and registering for one is so very simple. All you need to do is sign up to CAPEX which only requires an email and a password.

Rodrigues is the ideal educator with over 30 years of experience in finance senior management and has appeared on many international media outlets throughout the years. He holds a degree in economics and further degrees in coaching and leadership – perfect for teaching novice traders.

Integrated Tools

It’s great that new traders are willing to learn all about trading at the CAPEX Academy, and any experienced trader will tell you there is nothing wrong with some extra help too. CAPEX provides a collection of the finest additional trading tools of any broker. CAPEX insider hot stocks show you what big executives are doing with company stocks. Learn why insiders are selling or buying particular shares and increase your expertise.

Use CAPEX daily analyst ratings to find out the most relevant market movements based on data from top-financial analysts.  CAPEX even offers hedge fund activity data and daily news sentiments to back up your own analysis.

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What are Candle Sticks?

A candlestick is a type of price chart offered at CAPEX that is used in technical analysis and details the open and close price of an asset, along with the high and low prices for that designated period. Popularised in the US, candlesticks originated in Japan, hundreds of years earlier, where traders and merchants would use them to track market prices and daily momentum.

A candlestick is made up of a body and two wicks – the high and the low. The highest and lowest points of the body indicate the open and closing prices, while the two wicks represent the highest and lowest price points for the day. What you are left with resembles a candle stick.

For example, a long white or green candlestick would indicate strong buying pressure and the potential of a bullish market. Market awareness is key here – that long candlestick will have far more significance if the candlestick forms at a price support level. Conversely, a long black or red candlestick indicates selling pressure and a bearish market.

What are Types of Candlestick Patterns?

Candlestick patterns can be used in any market and are used to analyse both long and short periods of time – you can observe daily candlesticks or even by minutes! While candlesticks can be used to determine so many factors about a possible trend, they really serve two purposes. To spot reversals in trends and to identify a continuation in a trend. Meaning a candlestick pattern will show when a market value is about to change direction and show that the current market movement will maintain its course – be that up or down. Some candlestick patterns can also be used to determine trade execution timing. Such as the head and shoulders pattern that can be measured to determine where to place a price target.

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Popular Candlestick Patterns - Candle Patterns Cheat Sheets

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.


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.


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.

Are Candlestick Patterns Effective?

With candlesticks being as popular as they are, they must be incredibly successful right? Well, not always. Many novice traders at CAPEX think that because a candlestick pattern indicates a certain price direction, then that’s exactly what the market will do. Novice traders at CAPEX need to remember that candlestick patterns are fantastic indicators but at the end of the day, candlesticks are far from foolproof.

There are many factors that can influence the reliability of a candlestick pattern. What you are trading is an important factor too. If your chosen instrument is of low liquidity, candlestick patterns are notoriously less effective than those of high volume. Volatility plays a factor in effectiveness too and in these instances short time frame charts are particularly less reliable than longer timeframes.

There is always a psychological factor that may tell our brains that we think the candlestick pattern is effective. This is known as “confirmation bias” and essentially it is the concept that a trader might miss some red flags if the candlestick chart depicts enough to confirm their particular assessment of the market.

It can be 50/50

Many traders suggest the effectiveness and reliability of candlestick charts are about 50/50. There is a lot of probability involved and sometimes the market just doesn’t go the way the patterns would indicate. This is why it is best to use the CAPEX demo account to practice strategies and test how reliable your preferred candlestick patterns are.




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Practice with the CAPEX Demo Account

With so many candlestick patterns available to discover at CAPEX, it would be a real risk to play around in the live trading accounts on the WebTrader or MetaTrader 5 platform. That’s where the free CAPEX demo trading account comes in handy. Traders can attempt every possible candlestick trading pattern imaginable and risk none of their real money. You can fail as much as possible while you learn how to identify trends and develop trading strategies in a demo account that follows the live markets in real time.

Conclusion – Trade CFDs at CAPEX

You won’t find a day trader alive that doesn’t rely on charts featuring candlesticks when conducting any technical analysis of any financial instrument – be it cryptocurrency, stock, or forex. Candlesticks represent price movement over a given period and are easily identifiable. They can form over 100 unique patterns that can identify reversals, trends, continuations, and price targets. CAPEX offers all the charts a trader would ever need to observe candlestick patterns.

The best way to understand candlesticks and learn to use them effectively is by practicing in the CAPEX demo account for free. Sign up today to get started and begin to learn to trade using candlestick patterns.

Candlestick Patterns – FAQ

🕯What is the Best Candlestick Pattern?
📊 Do I Need to Learn Multiple Candlestick Patterns?
🤔How Can I Learn about Trading at CAPEX?
🎯Are Candlestick patterns accurate?
📉 How Can I Learn to Read Candle Charts?