Learning Popular Reversal Signals: 10 Candlestick Patterns
Spotting market reversals early is one of the most valuable skills a trader can develop. Candlestick patterns may provide a clear visual representation of price dynamics, which may help identify shifts in sentiment before they fully unfold. When applied correctly, they can serve as important parts of trading strategies.
This article examines 10 candlestick reversal patterns that experienced traders rely on to navigate both bullish and bearish turning points.
What Are Reversal Candlestick Patterns?Reversal candlesticks are important formations in technical analysis that signal a potential shift in the direction of an asset?s price. These patterns are observed within candlestick charts, where each "candle" reflects the opening, closing, high, and low prices for a specific period. Reversal patterns suggest that the current trend, whether upward or downward, may be losing momentum, providing a signal for traders to enter or exit the market before the trend reverses.
Reversal candlestick patterns come in both bullish and bearish forms. A bullish reversal indicates the potential end of a downward trend and the beginning of an upward movement, while a bearish reversal suggests the end of an uptrend and the start of a downtrend. Some common reversal patterns include the hammer, shooting star, engulfing candles, and three black crows or three white soldiers.
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