Examples of Candlestick Patterns
We previously wrote about candlestick patterns and how traders can use these candlesticks to make decisions based on regularly occurring patterns, which can help forecast short-term price moves in assets. Here are some examples of commonly used candlestick patterns that could benefit you when trading short term price moves:
Bearish Engulfing Pattern When there are a series of shortening green candlesticks, followed by a larger red candle, this pattern is called a bearish engulfing pattern (sellers outnumber buyers). This indicates that sellers are back in control and prices could decline.
Bullish Engulfing Pattern On the other hand, when there are a series of shortening red candlesticks, followed by a larger green candle, this pattern is called a bullish engulfing pattern (buyers outnumber sellers). This indicates that bulls have established some control and prices could lead higher.
Bearish Harami When a series of green candles is followed by a smaller red candle, this pattern is called bearish harami. Rather than acting on this pattern, traders should watch for it. This shows indecisiveness on the buyer’s side and more red candles could confirm this. However, if the price continues upward, all may still be well.
Bullish Harami After a series of red candles, a smaller green candle could indicate the pause of a trend. If it is followed by another green candle, more upside could be on the way.
Bearish Evening Star When the last candle of the pattern opens below the previous day's small real body, this is called an evening star. This is a topping pattern and shows a slowdown in buying and sellers taking over, potentially leading to even more selling.