Candlestick patterns are an important tool in technical analysis, used by traders to reflect price fluctuations. In this article, Forex Trading will introduce bullish candlestick pattern and the signs to recognize them. This is part of the secret to helping investors successfully place orders and earn profits. Let’s follow along!
General information about bullish candlestick pattern
The candlestick reversal pattern is one of the important technical analysis tools. Traders often use them during the investment process. It is also known as the Japanese candlestick reversal pattern and is used to forecast the downtrend or uptrend of the market.
Traders use candlestick reversal patterns to identify price reversal points. Based on that, you can exit orders or look for opportunities to enter orders to gain profits.
What does a bullish candlestick pattern mean?
The bullish candlestick pattern is one of the Japanese candlestick patterns on the chart. It is often seen as a sign of rising prices in the market.
A bullish candlestick pattern usually includes a candle with a longer body. In addition, candles have one or more small lower shadows or no lower shadows. This signifies the power of buyers and their control over the market. This pattern is often seen as a positive signal. This may suggest that the uptrend may continue or begin.
How a candlestick pattern works
A candlestick pattern works based on market price data. It is shown through candles on the chart. The main data includes the opening price (open), closing price (close), highest price (high), and lowest price (low) of each time unit. For example: 1 minute, 1 hour, 1 day.
Candle:
- Each candle usually represents a fixed period of time.
- The body of the candle represents the range between the opening price and closing price.
- The outline of the body (or color) often represents whether the closing price was higher than the opening price (bullish) or lower than the opening price (bearish).
Buy/sell signs:
- Candlestick patterns can create buy or sell signals. Based on the way the candles are arranged or formed.
- For example, a bullish candlestick pattern can be identified when the candle has a longer body and closes higher than the opening price.
- Conversely, a bearish candlestick pattern can be identified when the candle has a longer body and closes lower than the opening price.
Additionally, butterfly wing pattern can also be considered during technical analysis.
See more: Analyze & forecast trend effective candlestick pattern
The bullish candlestick pattern is popular in forex
Part of technical analysis using candlestick patterns is recognizing bullish candlestick reversal patterns. This is a sign that the price may change from a downtrend to an uptrend. When seeing strong bullish reversal patterns appear on candlestick charts, traders will often take advantage of this opportunity to open stock buy orders.
Dragonfly Doji candlestick pattern (drifting Doji candlestick)
The identifying characteristics of Dragonfly Doji are common characteristics of the bullish reversal candlestick pattern. Dragonfly Doji is shaped like a dragonfly with its wings open:
- Dragonfly Doji candlesticks often appear at the end of a downtrend.
- Dragonfly Doji’s body is absent, its wings are extended.
- The upper shadow of Dragonfly Doji is long, the lower shadow is short.
The meaning of Dragonfly Doji is when the opening price and closing price coincide. When Dragonfly Doji appears, it shows that buyers have complete control over the following trading sessions. There is a very strong price reversal trend.
Bullish Engulfing candlestick pattern (Bullish engulfing candlestick type)
The identifying characteristic of the Bullish Engulfing candlestick pattern is a reversal pattern consisting of two candles:
- The first candle is a bearish candle.
- The second candle is a bullish candle.
- The second candle must have a greater length and completely cover the previous candle.
Meaning of the Bullish Engulfing candlestick pattern (bullish engulfing) is often a signal that appears at the end of a downtrend. There is a reversal signal that becomes clearer when the first candle is a doji. This pattern shows that buyers are in control of the situation. There is a strong upward trend in price.
Piercing Pattern candlestick pattern (Pointed line candlestick type)
The identifying characteristic of the Piercing Pattern candlestick pattern is a pattern that forms at the end of a downtrend. It includes two candles:
- The first candle is a bearish candle.
- The second candle is a bullish candle.
- The length of the second candle must be at least 50% of the length of the previous candle number one.
- At the same time, the opening price of the second candle must create a gap with the closing price of the first candle.
The meaning of the Piercing Pattern candlestick pattern is that when it appears, it often indicates that the buyers have the upper hand. An upward trend in stock prices is likely to begin.
Bullish candlestick pattern Bullish Harami
The identifying characteristic of the Bullish Harami pattern is a reversal candlestick pattern. Consists of two candles that appear at the end of a downtrend. It is often used to note a reversal to an uptrend.
- The first candle is usually red.
- The second candle is usually green.
- The opening price of the second candle is usually higher than the first candle and creates a gap (GAP).
- The first candle covers the second candle.
The meaning of the Bullish Harami pattern is often assessed by the price gap between two candles. When the second candle increases in price and creates a gap with the first candle. This usually signifies that the bears are losing ground and the bulls are gaining the advantage. The trend reversal to an uptrend is emphasized. This may make investors consider opening orders.
Hammer candlestick pattern
The identifying characteristic of the Hammer Candle is a candle shaped similar to a Doji candle. Yes with a small candle body and a long lower shadow. While the upper shadow is often short or almost absent.
The meaning of the Hammer Candlestick is that when it appears, it usually signifies that buyers are in control of the situation, pushing prices higher. This is often a sign of an uptrend. At this time, investors can consider opening a buy order.
Morning Star Candle
The identifying characteristics of the Morning Star Candlestick pattern is a bullish reversal candlestick pattern consisting of three candles:
- The first candle is red and is a long bearish candle.
- The second candle has a small body or almost nobody. Could be a Doji, Hammer, or Spinning Top candlestick pattern.
- The third candle is a blue bullish candle.
The meaning of the Morning Star Candlestick pattern The Morning Star is that the first candle usually indicates that the sellers are in control of the situation and the price is falling. After a series of falling prices, the market can create hesitation among investors. It leads to the appearance of the second candle. The third candle usually indicates that the buyers have won and pushed the price up. When the Morning Star candlestick pattern appears, this is the time when investors can consider opening a buy order to earn profits.
Nến Bullish Abandoned Baby
The identifying characteristics of the Bullish Abandoned Baby candlestick pattern is a reversal candlestick pattern consisting of three candles:
- Candles number 1 and number 3 are large outside candles.
- Candle number 2 inside is smaller in size. Due to its small size, candle number 2 looks like an abandoned baby.
The meaning of the Bullish Abandoned Baby candlestick pattern is usually when it appears at the end of a price increase. They often come with a gap (Gap). Candle number 1 usually indicates that the price continues to decrease continuously until the margin between the buying and selling prices is so narrow that it is almost the same at the close. This creates candle number 2. This continuous decrease in price creates a gap, causing candle number 3 to appear. It often triggers a larger price uptrend.
Tweezer Bottom candlestick pattern (Tweezer bottom candlestick type)
The identifying characteristic of the Tweezer Bottom pattern is a pattern consisting of two candlesticks. It is used to forecast price reversals from a downtrend to an uptrend.
- The first candle is a bearish candle, usually long.
- The second candle is a bullish candle, with the opening price equal to the previous day’s closing price.
- Often, the two candlesticks in the Tweezer Bottom pattern have opposite colors.
The meaning of the Tweezer Bottom pattern is that the first candle usually shows that the price is continuing in a downtrend. On the contrary, the second candle shows a sign of a stock recovery.
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Revealing how to trade effectively with a bullish candlestick pattern
Like with the cup-with-handle pattern, to trade effectively with the strong bullish reversal candlestick pattern, investors need to follow the following rules:
- Wait for the pattern to form: Only open a buy order after the candlestick reversal pattern has been completed. Wait until the last candle ends to get enough confirmation. Opening orders before the model is complete can lead to incorrect decisions.
- Set a stop loss: Nothing is completely guaranteed. Therefore, always determine the stop loss point for each transaction. With the bullish reversal candlestick pattern, the stop loss is usually placed at the lowest or highest level of the pattern.
- Determine profit-taking point: Calculate the profit-taking point from the bottom to the top of the model to determine the desired profit level. After gaining experience with the reversal candlestick pattern, you can adjust your take profit point to catch bigger opportunities.
- Combine with other technical indicators: Combine bullish reversal candlestick pattern with strong support and resistance levels. Or other technical indicators to increase accuracy in determining trends and entry points.
Conclude
Above Forex Trading has compiled complete information about the bullish candlestick pattern. It can be affirmed that the candlestick reversal pattern is an important support tool that every trader should master to apply to their trading strategies. However, it is important that investors follow the rules when trading. To ensure the investment process in the foreign exchange market takes place most smoothly and safely.
Frequently asked questions
Bullish candlestick patterns often appears in what situations?
Usually appears at the end of a downtrend or after an accumulation period. When there is a transition from selling pressure to buying pressure.
What is the meaning of a bullish candlestick pattern?
The meaning of a bullish candlestick pattern usually represents a transition from selling pressure to buying pressure. It predicts a surge in prices in the market.
How to recognize a bullish candlestick pattern properly?
To properly recognize a bullish candlestick pattern, you need to pay attention to the shape and structure of the candles. As well as the combination with other factors: trading volume and support and resistance levels.
