In specialized trading,a very simple candlestick pattern is an up or down trend displayed graphically over a candle chart which some think may predict an upcoming market motion. The recognition of the pattern itself is generally subjective and automated programs that are commonly used in charting has to rely upon predetermined rules to follow the trend. These patterns are typically displayed as a series of horizontal lines that represent either a rising or falling trend. The simple idea behind the patterns is straightforward; the more the period of time of the line,the greater the probability of the trend continued.
Many investors will buy a stock based on the concept it will go up or down according to the candlesticks pattern beingused by their charting software. But while this idea may be tempting,it’s actually not a great one. The reason is that all trends may differ from day to day and even hour to hour. There are times once the market can go up but drop whenever you leave the stock market.
Another problem with using candlesticks patterns on your charts is they don’t provide you with a way of identifying a trend. What the charts does is allow you to easily see when the market has obtained a certain pattern and proceeded on. For that reason,it’s important that you know when to look at the chart and when to look away from it.
While most stock market patterns can be difficult to interpret,it’s likely to get a better feel for the tendency by paying close attention to the quantity. In other words,if the stock is creating a sudden rise in volume,there is an excellent chance it will probably be going up and if it has been decreasing for a while,it could indicate that the trend is beginning to turn down down.
Candlestick patterns are an excellent way to gauge the market’s direction and help you gain an awareness of the market. However,remember they cannot tell you the way in which the industry is led and can only provide you with a guidepost.
There are many other indicators that may give you a much better feeling for the way the stock market is going. The most essential thing to bear in mind is that most of them are different and the top ones are those that you locate that give you a sense of consistency.