📢 Ask Me Anything About Japanese Candlesticks: Sep 5, 5:45–6:45 PM!

Hi @TORAL_30971942

The true power of a candlestick pattern is only unleashed when it appears at the right location on a chart. For instance, a bullish reversal pattern is most effective when it forms after a price decline.

Based on my experience, most traders find that patterns like the hammer, shooting star, engulfing, and piercing patterns work best for them.

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How do you actually use candlestick patterns when it comes to a trading strategy ?

Hi @ANIMESH_5129627

Regardless of the timeframe (5min or daily or weekly), candlestick patterns work the same way. The shape of a pattern reveals the psychology of the market. Reversal patterns, for example, signal a shift in power from bulls to bears, or vice versa.

A breakout above a high or a breakdown below a low gives you an entry point.

If you’d like to learn more about candlesticks, you can explore this crash course: Japanese Candlesticks Crash Course - Uplearn

Hope this helps! :slight_smile:

Hi @user_48307705

Candlestick patterns can be a complete trading strategy on their own or they can be used as a part of a larger strategy. For e.g.:

  1. You can buy a stock simply because a hammer pattern has appeared
  2. Alternatively, you can use a breakout-retest strategy. In this case, a hammer at the retest level provides confirmation and confidence to make a buy decision.

I hope this helps! :slight_smile:

Should I always check volume when I see a candlestick pattern, or is it optional?

Hi @RAJDEEP_7935812

The effect of a candlestick pattern is the strongest on the very next candle and then the power gradually fades as new patterns emerge.

A candle, basically, tells you who is in power at that time - bulls or bears.

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Hi @PRATIKSHA_32976892

It is optional. But adding volume to your analysis gives you confirmation and confidence to take the trade.

What are some common mistakes people make when reading candlestick charts?

Hi @PRATIKSHA_32976892

One of the most common mistakes traders make is spotting reversal patterns in a sideways market. For e.g. a hammer found within a sideways trading range will not work as intended. This is because a hammer is a reversal pattern - it requires a downtrend to “reverse.” It must come after a decline and not in a sideways market.

To know more about how candles work, you can check out this course: Japanese Candlesticks Crash Course - Uplearn

I hope this helps :slight_smile:

That’s it, folks! Thanks for taking part in our LIVE AMA and asking all your questions. To know more about how candles work, you can check out this course: Japanese Candlesticks Crash Course - Uplearn

We’ll, as always, be back with another exciting AMA soon. If you found this session helpful, let’s keep the conversation going on the Community.

What did you enjoy the most and what topics should we cover next? Tell us in the comments below! :backhand_index_pointing_down:

Are reversal patterns like Doji, Hammer, or Shooting Star still effective in today’s algo-heavy markets?

Hi @Rameez

It is an interesting question. Algo-dominated markets may reduce the effectiveness of reversal patterns, to a certain extent, due to the noise, false signals or simply SL hunting.

That is the reason most Pro-traders use candlestick patterns along with confirmations of other tools and indicators such as volume, RSI divergence. Similarly, one can also observe charts on different timeframes to get a better picture of the overall market direction.

Hope this helps!

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