In technical trading,a simple candlestick pattern is an up or down trend shown graphically within a candle chart which some believe can predict an upcoming market motion. The recognition of this pattern itself is generally subjective and automated programs which are widely utilized in charting must rely upon predetermined rules to follow the trend. These patterns are generally displayed as a series of horizontal lines which represent either a rising or falling trend. The simple idea behind the routines is simple; the longer the period of time of the line,the greater the likelihood of the trend continuing.
Many investors will buy a stock based on the idea it will go up or down based on the candlesticks pattern used by their charting applications. But while this idea could be tempting,it’s actually not a good one. The reason is that all trends can differ from day to day and even hour to hour. There are instances once the market can go up but thendrop as soon as you depart the stock exchange.
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 enable you to easily see if the market has obtained a specific pattern and proceeded on. Therefore,it’s important that you know when to look at the chart and when to look away from it.
While most stock exchange patterns can be hard to interpret,it’s possible to find a better feel for the trend by paying careful attention to this volume. To put it differently,if the stock is creating a sudden rise in volume,there’s a very good possibility it will likely be moving up and when it’s been declining for a little while,it might indicate that the trend is starting to turn downward.
Candlestick patterns are a very good way to gauge the market’s direction and allow you to get an awareness of the market. But,remember they cannot tell you the direction in which the industry is led and can only supply you with a guidepost.
There are many other indicators that can give you a better feeling for the direction the stock exchange is going. The most essential point to bear in mind is that most of them are distinct and the top ones are those which you find that offer you a feeling of consistency.