PRICE ACTION

CANDLESTICK GUIDE

@WETRADEDAILY
KEEP PRACTICING AND KEEP GROWING
 @WETRADEDAILY

What are Candlesticks?

Candlesticks are a way of communicating information

about how price is moving. Candlestick charts are
available on Tradingview.com or on your broker
terminal for all the stocks, fno scripts, currencies, and
commodities.

Above is a sample of a candlestick chart with a bullish

candle (green) and a bearish candle (red).

@WETRADEDAILY
 @WETRADEDAILY

Why do Candlesticks Work?

Price action traders rely on candlesticks because they

give out a lot of information on the price movement,
allowing traders to compare and understand the
behavior of the price in real-time. Each candlestick can
be read on different time frames to understand the In-
depth movement of price every min, hour, and day.

The ability to read candlesticks allows the price action

trader to become a meta-strategist, taking into account
the behaviors of other traders and large-scale market-
movers. In other words, candlestick patterns help
traders.

@WETRADEDAILY
 @WETRADEDAILY

What are candlestick pattern?

Candlestick patterns are very powerful trading

concepts, Price action traders have been following the
candlestick patterns for ages for their conviction of the
price movement. Certain patterns help you understand
the future movement/direction of the price.

I personally consider candlestick patterns from the last

5 years and I can't find a replacement for them.
Candlestick patterns are the language of the markets
that'll help you communicate and understand the price
better than other traders in the market.

@WETRADEDAILY
 @WETRADEDAILY

Types of candlestick patterns

The bullish engulfing pattern is a two candlestick

pattern that appears at the bottom of the downtrend.

As the name suggests, this is a bullish pattern that

prompts the trader to go long. The two-day bullish
engulfing pattern is drawn in the chart above.

The previous trend should be a downtrend, with the

formation of the bullish engulfing candle, the trend
tends to change to an uptrend.

@WETRADEDAILY
 @WETRADEDAILY

Bearish Engulfing Pattern

The bearish engulfing pattern is a two candlestick

pattern that appears at the top end of the trend,
making it a bearish pattern. The thought process
remains very similar to the bullish engulfing pattern,
except one has to think about it from a shorting
perspective.

The previous trend should be an uptrend with the

formation of the bearish engulfing candle, the trend
tends to change to a downtrend.

@WETRADEDAILY
 @WETRADEDAILY

Doji Pattern

The Doji is a commonly found candle on the charts. It

has a small body and long shadows. A Doji has a very
small body, which can be red or green. The color does
not matter. It has to have a long shadow or stick, which
is several times the size of its body.

The formation of a Doji candle indicates that the

current running trend is losing its strength and a trend
reversal is possible.

@WETRADEDAILY
 @WETRADEDAILY

Dragonfly Doji Pattern

A Dragonfly Doji Pattern is formed when the buyers in

the market have essentially managed to push the price
higher in the current candlestick, this indicates the
strength of the buyers in the market.

The dragonfly doji pattern is confirmed when the high,

open, and close prices are equal, or very similar. The
longer the wick, the more significant the move can be.

@WETRADEDAILY
 @WETRADEDAILY

Gravestone Doji Pattern

A Gravestone Doji Pattern is formed when the sellers in

the market have essentially managed to push the price
lower in the current candlestick, this indicates the
strength of the sellers in the market.

Gravestone doji is part of the Doji candlestick patterns

and can be found at the top of a trend. Gravestone doji
is a bearish candlestick pattern that'll indicate a trend
reversal from an up trend to a downtrend.

@WETRADEDAILY
 @WETRADEDAILY

Morning Star Pattern

This is a 3-candlestick pattern that can easily be missed

but gives a lot of information based on the shift in
power between buyers and sellers. If you look at it this
way, it tells the story of how the momentum changes.

It goes from sellers being dominant to neither buyers

nor sellers being dominant then shows the buyers as
dominant – giving you the flow of momentum.

@WETRADEDAILY
 @WETRADEDAILY

Evening Star Pattern

This is again a 3-candlestick pattern that gives a lot of

information based on the shift in power between
buyers and sellers. If you look at it this way, it tells the
story of how the momentum changes.

It goes from buyers being dominant to neither buyers

nor sellers being dominant then shows the sellers as
dominant – giving you the flow of momentum.

@WETRADEDAILY
 @WETRADEDAILY

Head and shoulders

Head and shoulders is a chart pattern in which a large

peak has a slightly smaller peak on either side of it.
Traders look at head and shoulders patterns to predict
a bullish-to-bearish reversal.

Typically, the first and third peaks will be smaller than

the second, but they will all fall back to the same level
of support, otherwise known as the ‘neckline’. Once the
third peak has fallen back to the level of support, it is
likely that it will breakout into a bearish downtrend.

@WETRADEDAILY
 @WETRADEDAILY

Double top

A double top is another pattern that traders use to

highlight trend reversals. Typically, an asset’s price will
experience a peak, before retracing back to a level of
support.

It will then climb up once more before reversing back

more permanently against the prevailing trend.

@WETRADEDAILY
 @WETRADEDAILY

Double bottom

A double bottom chart pattern indicates a period of

selling, causing an asset’s price to drop below a level of
support. It will then rise to a level of resistance, before
dropping again. Finally, the trend will reverse and begin
an upward motion as the market becomes more
bullish. A double bottom is a bullish reversal pattern
because it signifies the end of a downtrend and a shift
towards an uptrend.

@WETRADEDAILY
 @WETRADEDAILY

Cup and handle

The cup and handle pattern is a bullish continuation pattern that is

used to show a period of bearish market sentiment before the overall
trend finally continues in a bullish motion. The cup appears similar to
a rounding bottom chart pattern, and the handle is similar to a wedge
pattern – which is explained in the next section.

Following the rounding bottom, the price of an asset will likely enter a
temporary retracement, which is known as the handle because this
retracement is confined to two parallel lines on the price graph. The
asset will eventually reverse out of the handle and continue with the
overall bullish trend.

@WETRADEDAILY
 @WETRADEDAILY

Rising Wedge Pattern

A rising wedge is represented by a trend line caught

between two upwardly slanted lines of support and
resistance. In this case the line of support is steeper
than the resistance line. This pattern generally signals
that an asset’s price will eventually decline more
permanently – which is demonstrated when it breaks
through the support level.

@WETRADEDAILY
 @WETRADEDAILY

Falling Wedge Pattern

A falling wedge occurs between two downwardly

sloping levels. In this case, the line of resistance is
steeper than the support. A falling wedge is usually
indicative that an asset’s price will rise and break
through the level of resistance, as shown in the
example below.

@WETRADEDAILY
 @WETRADEDAILY

Pennant or Flag Pattern

Pennant patterns, or flags, are created after an asset

experience a period of upward movement, followed by
a consolidation. Generally, there will be a significant
increase during the early stages of the trend, before it
enters into a series of smaller upward and downward
movements.

@WETRADEDAILY
 @WETRADEDAILY

Ascending Triangle Pattern

The ascending triangle is a bullish continuation pattern

that signifies the continuation of an uptrend.

Ascending triangles can be drawn onto charts by

placing a horizontal line along with the swing highs –
the resistance – and then drawing an ascending trend
line along with the swing lows – the support.

@WETRADEDAILY
 @WETRADEDAILY

Descending Triangle Pattern

In contrast, a descending triangle signifies a bearish

continuation of a downtrend.

Typically, a trader will enter a short position during a

descending triangle – in an attempt to profit from a
falling market.

@WETRADEDAILY
 @WETRADEDAILY

CANDLESTICK PATTERNS CHEAT SHEET

@WETRADEDAILY
 @WETRADEDAILY

REVERSAL PATTERNS CHEAT SHEET

Reversal patterns indicate a high probability that the

existing trend has come to an end and that there is a
good chance of the trend reversing direction.

They give entry signals early in the formation of a new

trend, making their entries quite lucrative, with fairly
small protective stops. However, the trend might not
reverse immediately and may enter a trading range
instead.
@WETRADEDAILY
 @WETRADEDAILY

CONTINUATION PATTERNS
CHEAT SHEET

Continuation Patterns are recognizable chart patterns

that signAL a period of temporary consolidation before
continuing in the direction of the original trend.

Consolidation appears in the form of sideways price

movement. The pattern completes itself upon a strong
breakout of the consolidation zone, resulting in the
continuation of the preceding trend. Continuation
patterns usually play out over the short to
intermediate-term.

@WETRADEDAILY
 @WETRADEDAILY

CONCULSION

Congratulations, you have made it to this point. This

study material should have helped you dig deeper into
the world of technical analysis. I have tried my best to
provide you the most relatable and easy-to-understand
Price action candlestick guide.

Never limit yourself with education and always thrive

to learn more to achieve greater heights of success.

If you are hungry enough to explore more about the

stock market and price action you can get in touch with
us on Instagram @wetradedaily and we'll put our best
foot forward to make sure you have the best learning
experience with us.

Good Luck
KEEP PRACTICING AND KEEP GROWING

- Chiru Anand
-Ishwar Singh Panwar

@WETRADEDAILY
 @WETRADEDAILY

CREDITS

www.investopedia.com
www.dailyfx.com
3commastutorials.medium.com
iq-study.com
http://www.chart-formations.com/
top10stockbroker.com
www.alphaexcapital.com
https://aliceblueonline.com/
and many more...

The main intention of this Guide is not to

commercialize it, But to help the trading community
understand and progress with the right knowledge

...

@WETRADEDAILY