Candle Flashcards
What does the body of a candlestick represent?
The opening and closing prices
A long body indicates strong price movement, while a short body suggests indecision.
What do long wicks in a candlestick indicate?
Volatility
Short wicks suggest less price fluctuation.
What does a green/white candlestick signify?
Bullish - Close > Open
A red/black candlestick signifies bearish - Close < Open.
What is a Hammer candlestick pattern?
Small body at the top, long lower wick suggesting potential bottom after a downtrend
Confirmation requires a bullish candle following the Hammer.
What does a Hanging Man pattern suggest?
Potential top
It looks like a Hammer but appears at the top of an uptrend, confirming with a bearish candle following.
What is the appearance of an Inverted Hammer?
Small body at the bottom, long upper wick
Indicates potential bottom with confirmation from a bullish candle following.
What does a Shooting Star pattern indicate?
Potential top
It looks like an Inverted Hammer but appears at the top of an uptrend, confirmed by a bearish candle following.
What is a Doji candlestick?
Open and close prices are the same or very close, forming a cross or plus sign
Indicates indecision and requires context.
What is the significance of a Gravestone Doji?
Long upper wick with bearish potential
Indicates indecision at the top of an uptrend.
What does a Dragonfly Doji signify?
Long lower wick with bullish potential
Indicates indecision at the bottom of a downtrend.
What characterizes a Spinning Top candlestick?
Small body with both upper and lower wicks
Indicates indecision and needs confirmation.
What does a Marubozu candlestick indicate?
Strong bullish (white) or bearish (black) momentum
Characterized by a long body with no wicks.
What are Three White Soldiers?
Three consecutive bullish candles, each closing higher than the previous
Indicates a strong uptrend signal confirmed by volume increase.
What does Three Black Crows signify?
Three consecutive bearish candles, each closing lower than the previous
Indicates a strong downtrend signal confirmed by volume increase.
Describe the Rising Three Methods pattern.
Long white candle followed by three small bearish candles within the range of the first, then a long white candle closing above the first
Confirmation requires a breakout above the high of the first candle.
What is the Falling Three Methods pattern?
Long black candle followed by three small bullish candles within the range of the first, then a long black candle closing below the first
Confirmation requires a breakout below the low of the first candle.
What does a Bullish Engulfing pattern entail?
Bullish candle completely engulfs the previous bearish candle
Indicates a bottom reversal signal confirmed by volume increase.
What characterizes a Bearish Engulfing pattern?
Bearish candle completely engulfs the previous bullish candle
Indicates a top reversal signal confirmed by volume increase.
What is a Piercing Line pattern?
Bearish candle followed by a bullish candle that opens below the previous candle’s low and closes above its midpoint
Indicates a bottom reversal signal confirmed by further bullish movement.
What does the Dark Cloud Cover pattern signify?
Bullish candle followed by a bearish candle that opens above the previous candle’s high and closes below its midpoint
Indicates a top reversal signal confirmed by further bearish movement.
What is a Harami pattern?
A large candle followed by a smaller candle completely contained within the body of the larger candle
Bullish Harami appears at bottoms; Bearish Harami at tops, indicating indecision.
What are Tweezer Bottoms?
Two candles with matching lows
Indicates a bottom reversal signal.
What are Tweezer Tops?
Two candles with matching highs
Indicates a top reversal signal.
What does the Morning Star pattern consist of?
Three-candle pattern at a bottom: bearish candle, doji or small-bodied candle, bullish candle
Indicates a bottom reversal signal confirmed by volume increase.
What is the Evening Star pattern?
Three-candle pattern at a top: bullish candle, doji or small-bodied candle, bearish candle
Indicates a top reversal signal confirmed by volume increase.
What describes the Three Inside Up pattern?
Bearish candle followed by a smaller bullish candle contained within it, followed by a larger bullish candle closing above the first
Indicates a bottom reversal.
What is the Three Inside Down pattern?
Bullish candle followed by a smaller bearish candle contained within it, followed by a larger bearish candle closing below the first
Indicates a top reversal.
What role does volume play in candlestick patterns?
Increased volume during the pattern strengthens the signal
Confirmation of patterns is often supported by volume increase.
What should be combined with candlestick patterns for better analysis?
Other indicators like RSI, MACD, moving averages
Trendlines, support, and resistance levels also enhance analysis.
Why is context important in candlestick analysis?
The location of the pattern in the overall trend is crucial
Patterns occurring at key levels are more significant.
What is the significance of using multiple timeframes in candlestick analysis?
Look for confluence across different timeframes
This can provide stronger confirmation of signals.
True or False: Candlestick patterns guarantee success in trading.
False
They are not foolproof and should be combined with risk management.
What is essential for effective risk management when using candlestick patterns?
Using stop-loss orders and proper position sizing
This helps to mitigate potential losses.
What is the importance of practice in candlestick pattern analysis?
Paper trading and backtesting are essential
They help in mastering candlestick analysis.
How should market conditions affect candlestick interpretation?
Adapt your interpretation based on market volatility and liquidity
This ensures more accurate analysis.
