Cande Pattern Detection

Candlestick patterns remain a crucial resource for technical traders, and here’s why. The financial market is highly volatile and therefore offers no assurances. However, a candlestick chart helps conduct in-depth price behavior analyses, thereby providing some stability, no matter how minimal. 

In this article, we’ll consider the essentials of the candlestick and look at the seven most common candlestick patterns.

What Is a Candlestick Pattern?

A candlestick pattern is the movement (rise and fall) of an asset’s price, graphically represented on a chart. A trader can predict, to some extent, the market reaction to certain occurrences using this pattern. As such, the tool is a common consideration for entering and exiting a trade. There are seven common candlestick formations, and even more according to different schools of thought.  

Primary Categories of the Candlestick Formation

You may classify the candlestick pattern according to the three more foreseeable behaviors they may reflect after appearing on a chart:

  • Bullish: A bullish candlestick pattern predicts that the market will go on an upward trend.
  • Bearish: A bearish candlestick formation suggests that the market will take a nosedive.
  • Neutral: The neutral candlestick holds the opinion that the market is indecisive and there’s a huge war going on between the bulls and bears. 

The Most Common Types of Candlestick Formations

Hammer

Hummer Candle Stick

  • The hammer pattern portrays a bullish reversal. It is synonymous with downward trends, and the chart depicts it as a candle with a short top and long lower wick. 
  • The image suggests that demand levels weren’t commensurate with price when the asset was falling, thus leading to a long lower handle. The presence of demand in this region suggests a trend reversal signal, which many interpret as a cue to buy (entry).

Inverted Hammer

Inverted Hummer Candle Stick

  • The inverse hammer is similar to the hammer pattern in logic, but it appears during an upward trend. It’s a bearish reversal pattern. 
  • The inverted hammer appears on the candlestick chart as a candle with a short bottom and long upper wick. You may use it during upward price movement to close your trade or open a short-term position. Many may consider the inverse hammer a sell signal (exit).

Three White Soldiers

Three White Soldiers

  • Some experts may call this pattern the “three advancing white soldiers,” suggesting that the three sweet-smelling candles continue an upward climb during a downward trend. This defying formation suggests a bullish potential and helps identify trend reversals.
  • The candlestick chart displays your three white soldiers as three candles, each with a long body moving upward following a downtrend.

Morning Star

Morning Star

  • The morning star brings hope to the astrologist, and it does the same when your candlestick horoscope picks up this pattern. A morning star indicates the reversal of a bearish trend, thereby spurring most traders to strengthen their buy points. Any asset price that forms a morning star following a buy signal is likely to experience a trend reversal.
  • You can find the morning star as three candles on a chart. The first candle is long and narrow, the second is closing below the first, and the third is a long and growing candle closing above the middle of your first candle. 

Evening Star

Evening Star

  • The evening star depicts a bullish trend reversal. This formation is shaped during an upward trend to suggest that prices may fall soon. It’s typically your call to sell. 
  • To find the evening star on the chart, check for three candles where a small and growing candle follows a long and increasing candle before a long, decreasing candle closing below the middle of the first candle. 

Abandoned Baby

Abandoned Baby

  • The wailing abandoned baby may be a reversal signal for a bullish or bearish trend. Three candles represent the pattern on the chart.
  • The abandoned baby shows on the chart as three candles: the first long and moving upward, some market gap, and the second candle (Doji) before the third, which is also long and upward-driving.

Engulfing Pattern

Engulfing Patterns

  • The engulfing formation is a bullish or bearish reversal signal that appears as two candles. The second candle completely overwhelms the first one on the chart. 
  • Suppose this pattern forms during an uptrend; prices are likely to have a bearish reversal. Should it appear during a downtrend, prices may reverse back up. 

How to Spot Candlestick Patterns with Obolon9

Obolon9 is trading software that combines the diligence and precision of automated scenarios and the flexibility of manual trading to help traders make excellent trading decisions. It offers programmed trading tools, as well as one adapted personalized script. The candlestick pattern detector is one of these tools.

Unique Benefits of the Obolon9 Candlestick Pattern Detector

  • The Obolon9 candlestick formation spotter has remained a trusted trader resource for decades. It has the full trust of thousands of traders.
  • The pattern detector is super quick. It notifies you of formations the instant they form, so you can make your decisions when it matters. With this advantage, you can maximize even the opportunities that open for the shortest windows.
  • The Obolon9 candlestick formation detecting script can recognize up to twelve candlestick patterns. That’s a wider range compared to most detectors these days. 

What Is a Candlestick Detector?

The candlestick indicator is a resource that recognizes candlestick patterns as soon as they form and labels them appropriately before notifying you. Some may suggest that this inbuilt detector may be unnecessary since the eyes can detect these formations. However, you can’t sit 24/7 in front of your computer trying to recognize these patterns, and the automatic candlestick spotter saves you the effort. 

Why Is a Candlestick Pattern Detector Valuable?

Crypto traders and investors use the candlestick formation indicator for three major decisions:

  • Entry Signals: Traders use the candlestick pattern finder to enter the market at the right time. For instance, you may enter a trade if the detector indicates a bullish trend.
  • Exit Signals: The candlestick pattern indicator also suggests the appropriate time to leave a trade. You may interpret the bearish formation as your cue to exit before prices crash.
  • Trailing Stops: Traders may enhance their stop-loss orders through the trailing stop feature. A capable candlestick formation indicator helps predict potential trailing stops. 

Final Word

Candlestick patterns may not guarantee future price movement, but they are good indicators of what may happen to an asset. And in the irrational crypto world, any hint of predictability matters greatly. Therefore, it’s necessary to pay good attention to the most common candlestick patterns

It’s recommended to optimize candlestick benefits with reliable tools, such as those offered by Obolon9. Such platforms save you time when looking for candlestick patterns.