In specialized trading,a very simple candlestick pattern is an up or down trend displayed graphically over a candle graph which some believe can predict an upcoming market movement. The recognition of the pattern itself is usually subjective and automated applications which are commonly utilized in charting has to rely upon predetermined rules to follow the fad. These patterns are typically displayed as a series of horizontal lines which signify either a rising or falling trend. The basic idea behind the patterns is simple; the longer 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 thatit will go up or down according to the candlesticks pattern used by their charting software. However, while this notion could be tempting,it’s really not a great 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 whenever you leave the stock market.
Another problem with using candlesticks patterns in your graphs is thatthey do not supply you with a way of identifying a fad. What the graphs does is allow you to easily see when the market has obtained a certain pattern and proceeded on. Therefore,it’s important that you understand when to examine the graph and when to look away from it.
While most stock exchange patterns can be difficult to interpret,it’s likely to find a better feel for the tendency by paying careful attention to the volume. In other words,if the stock is making a sudden increase in volume,there’s a very good chance thatit will probably be going up and if it has been declining for a little while,it might 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 awareness of the market. But,remember thatthey cannot tell you the way in which the industry is headed and can only supply you with a guidepost.
There are many different indicators that can provide you a much better sense for the way the stock exchange is heading. The most important point to bear in mind is that all of them are different and the best ones are the ones which you locate that give you a sense of consistency.