In specialized trading,a simple candlestick pattern is an up or down trend shown graphically over a candle chart which some believe can predict an upcoming market motion. The recognition of the pattern itself is usually subjective and automated programs that are commonly utilized in charting must rely upon predetermined rules to adhere to the fad. These patterns are generally displayed as a set of horizontal lines that represent either a rising or falling trend. The basic idea behind the patterns is straightforward; the longer the period of time of the line,the higher the probability of the trend continued.
Many investors will buy a stock based on the idea thatit is going to go up or down according to the candlesticks pattern beingused by their anti virus applications. However, while this idea may be tempting,it’s really not a good one. The main reason is that all tendencies can vary from day to day and even hour to hour. There are times when the market can go up but thendrop as soon as you leave the stock market.
Another issue with using candlesticks patterns in your graphs is thatthey do not supply you with a means of identifying a fad. What the graphs does is allow you to easily see if the market has taken a specific pattern and proceeded on. Therefore,it’s important to understand when to examine 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 sense for the trend by paying careful attention to the volume. In other words,if the stock is making a sudden increase in volume,there’s an excellent possibility thatit will probably be going up and if it’s been decreasing for a little while,it might demonstrate that the trend is beginning to turn downward.
Candlestick patterns are an excellent way to evaluate the market’s direction and allow you to get an understanding of the marketplace. However,keep in mind thatthey cannot tell you the direction where the market is headed and can only supply you with a guidepost.
There are many other indicators that can provide you a better sense for the direction the stock market is heading. The most essential point to bear in mind is that most of them are different and the top ones are those that you find that give you a sense of consistency.