In specialized trading,a simple candlestick pattern is an up or down trend displayed graphically over a candle chart that some believe can predict an upcoming market motion. The recognition of this pattern itself is usually subjective and automatic programs that are commonly used in charting has to rely upon rules that are predetermined to adhere to the trend. These patterns are typically displayed as a series of horizontal lines that signify either a rising or falling trend. The basic idea behind the patterns is straightforward; the longer the time period of the line,the higher the probability of the trend continuing.
Many investors will purchase a stock based on the concept it will go up or down based on the candlesticks pattern used by their charting applications. But while this notion may be tempting,it’s really not a good one. The main reason is that all tendencies can differ from day to day and even hour to hour. There are instances when the market can go up but drop whenever you leave the stock market.
Another issue with using candlesticks patterns in your charts is they don’t supply you with a means of identifying a trend. What the charts does is allow you to easily see if the market has obtained a specific pattern and moved on. Therefore,it’s very important that you know when to examine the chart and when to look away from it.
While most stock market patterns can be difficult to interpret,it’s likely to find a better feel for the tendency by paying careful attention to this quantity. In other words,if the stock is creating a sudden rise in volume,there’s a very good chance it will likely be going up and if it’s been declining for a while,it could demonstrate that the trend is beginning to turn down down.
Candlestick patterns are a very good way to evaluate the market’s direction and help you get an understanding of the marketplace. But,keep in mind they cannot tell you the direction where the market is led and can only supply you with a guidepost.
There are many other indicators that can give you a much better sense for the direction the stock market is going. The most essential thing to bear in mind is that all of them are different and the best ones are the ones that you find that give you a sense of consistency.