Chart pattern overview
There are much market conditions, called char pattern. These are mostly used in Price action trading but can very usefully in other trading strategies too. The price of an asset base on number of buying and selling. If more trader buy an asset the price rise. If more people sell it the price falls. A little exception is gold. The gold price gets daily set up by a meeting of gold traders in the Rothschilds-Bank in London. Most chart platters use shadows and are only usable with candle sticks and not with with line charts. Shadow is another name for wick. In the following the most common pattern.
A doji (Japanese for big mistake) is a candle stick with no or a very small body and a big shadow in both directions. These are primary warn signals. On a doji the traders was undecided. Sometimes the price gone up, sometimes the price gone down. You don’t know whether the price will goes up or down. In a trending market this means the buyer in a downtrend or the sellers in an uptrend brake the trend out. This can means all. The trend stop, continue or revert.
Hanging man doji
A hanging man doji has a very small bearish body and a long downward shadow. You find them only in a down trend. First most people sell the asset and the price fall. Then a threshold is hit and more people buy them for the cheap price than selling them, hence the price incremented again until the candle sticks close. After this chart pattern it is expected that the price continue rising and at the point the price get up again grow a new support. More longer shadows are stronger signals. The shadow should be at least than 3 times longer than the body. Many traders wait for a second bullish candle stick as confirmation. May appear a new support below the asset. If the doji doesn’t have a body or it is bullish it is a hammer doji.
A hammer has like a real hammer a very small body and a long downward shadow. It is the strong version of a hanging man doji. The hammer appears like the hanging man only in down trends. Other than a hanging man doji his body is bullish or the open is the closed price. This means the buys have pushed the price more back as a hanging man doji and the signal/warning is stronger.
Shooting star doji
The shooting star is the opposite of a hammer. He has a long upward shadow, a small body and occurs only in uptrends. First people bought the asset and increment the price, and then a point was reaches at them the traders sell more than they buy and the price fall again. If you see such kind of candle it is except that this point build a resistance and the price continue falling. If you trade binary options a PUT trade is recommend. Many traders wait for a second confirm candle stick, The shadow of the shooting star is at least three times longer than the body. Longer shadows mean stronger price reversal and a stronger signal. If the signal is a doji or bearish candle stick you see a stronger gravestone doji.
A gravestone doji only occurs in uptrends. It is the strong version of the shooting star doji pattern. The sells pull the price such much down that the gravestone is a perfect doji or already a bearish candle. This means a strong trend reversal is expected.
|Name||Trend||Body||Upper shadow||Lower shadow||Warning of||Strength|
|Hanging Man||downtrend ↓||bearisch ↓||short or nonexist||long||revert to uptrend||low|
|Hammer||downtrend ↓||bullish ↑ or doji||short or nonexist||long||revert to uptrend||high|
|Shooting star||uptrend ↑||bullish ↑||long||short or nonexist||revert to downtrend||low|
|Gravestone||uptrend ↑||bearish ↓ or doji||long||short or nonexist||revert to downtrend||high|
|Dragon fly||up- or downtrend||No body||nonexist||long||strong revert of current trend|