What is a candlestick chart?

Candlestick charts are a technical tool that packs data for multiple time frames into single price bars. This makes them more useful than traditional open, high, low, close (OHLC) bars or simple lines that connect the dots of closing prices. Candlesticks build patterns that may predict price direction once completed.

How do candlestick patterns work?

Here is a sampling to get you started. Patterns are separated into bullish and bearish. Bullish patterns indicate that the price is likely to rise, while bearish patterns indicate that the price is likely to fall. No pattern works all the time, as candlestick patterns represent tendencies in price movement, not guarantees.

Why do traders use Japanese candlestick charts?

Read our Advertiser Disclosure. Traders often rely on Japanese candlestick charts to observe the price action of financial assets. Candlestick graphs give twice as much information as a standard line chart. They also allow you to interpret price data in a more advanced way and to look for distinct patterns that provide clear trading signals.

What are engulfing candlestick patterns?

Engulfing candlestick patterns are double candle patterns. They consist of a random candle and another bigger candle that fully encompasses or “engulfs” the price action contained within the first. The bullish engulfing pattern appears during bearish trends.