In technical trading,a very simple candlestick pattern is an up or down trend shown graphically over a candle graph which some believe can predict an approaching market motion. The recognition of the pattern itself is usually subjective and automatic programs that are commonly used in charting must rely upon rules that are predetermined to follow the fad. These patterns are generally displayed as a series of horizontal lines that represent either a rising or falling trend. The basic idea behind the routines is simple; the longer the period of time of the line,the greater the likelihood of the trend continuing.
Many investors will purchase a stock based on the concept it will go up or down according to the candlesticks pattern beingused by their anti virus applications. But while this notion could be tempting,it’s actually not a great one. The reason is that all trends can differ from day to day and even hour to hour. There are instances when the market can go up but drop whenever you depart the stock exchange.
Another issue with using candlesticks patterns on your charts is they don’t provide you with a means of identifying a fad. What the charts does is allow you to easily see when the market has taken a certain pattern and moved on. Therefore,it’s important that you understand when to look at the graph and when to remove from it.
While most stock market patterns can be difficult to interpret,it’s possible to get a better feel for the tendency by paying careful attention to the volume. To put it differently,if the stock is creating a sudden rise in volume,there’s a very good possibility it will likely be going up and when it’s been declining for a little while,it might indicate that the trend is starting to turn down down.
Candlestick patterns are a very good way to evaluate the market’s direction and help you gain an awareness of the market. But,keep in mind they cannot tell you the way where the market is headed and can only provide you with a guidepost.
There are many different indicators that can provide you a much better sense for the way the stock market is going. The most essential point to remember is that all of them are different and the best ones are those that you locate that give you a sense of consistency.