What Are Bullish Candlesticks and How to Trade Them?
Bullish candlesticks are one of two different types of candlesticks that form on stock charts. The bullish candlestick and bearish candlestick. Bullish candles show that a stock is going up in price. They are typically green or white on stock charts. Bearish candles show that price is going down. They are typically red or black on stock charts. Watch our video on how to identify and trade bullish candlesticks.
What Is a Bullish Candlestick Pattern & How to Identify These Candlesticks?
Bullish candlesticks make up part of the foundation of all stock charts. A bullish candlestick forms when the bulls try to push price up. The close of the candle is higher than its opening price. They are typically either green or white on a chart.
Bullish candlesticks are one of 2 different types of candlesticks that form on stock charts. The bullish candlestick and bearish candlestick. Watch our video above to learn how to identify bullish candlesticks and the role that they play when trading. Candlestick charts originated in Japan with rice traders. They track price action or price movement. A rice trader by the name of Homma realized that emotions affected the price of rice.
In fact, he came up with this system to gauge price action along with emotion because emotions move markets. Excitement, greed and fear move markets on a daily basis. Comparatively, knowing how to read stock charts helps to gauge the emotions of millions of traders around the world.
The stock market is a war between the bulls and the bears. As a result, you need to know who’s winning the war at the time you’re trading so you can make smarter trading decisions. You wouldn’t want to short a stock when it’s bullish and knowing the difference matters!
Hence bullish candlesticks make you aware of buyers. The more buyers there are the more price rises. These candlesticks are on every chart you use. As a result, knowing how to read them is incredibly important. Bullish candlesticks patterns tell you when a stock is in a bullish trend. In fact, reading candlesticks is the first line of defense in technical analysis.
How to Read Bullish Candlesticks
Each daily candlestick shows one day’s worth of price data; the opening price, the closing price, along with the high and low of the day. The color of the candlestick body tells you if the opening or closing price is higher.
The same formula applies to each time frame chart you’re viewing. Traders typically use candlestick charts from 1 minute candles all the way to monthly candles.
In order to get bullish candlesticks you want the closing price to be higher than the opening price. The filled part of the candlestick is called the real body. The lines coming out of the top and/or bottom are tails (bottom) or wicks (top).
The high of the day is the top wick. The low of the day is the bottom wick. Bullish candlesticks show buying pressure.
The shorter the real body of a candlestick, the more indecision the stock is in. As a result, a nice full real body is telling you the stock is strong. Take our free online trading courses.
Using With Technical Indicators
Knowing how to read candlesticks is the first and most important step of stock market basics. When you can do that, you pair them up with technical indicators such as VWAP, simple moving averages, exponential moving averages, just to name a few.
In fact, technical indicators are a matter of preference and you’ll have to find which ones work for you. Candlesticks ultimately tell you where support and resistance are.
The technicals tell you when a trend is happening. You can have all your technicals in a bearish trend. Then a bullish candlestick forms. Now if the real body is small, it’s in indecision mode and could go either way.
However, if you have the big full real body then you know buying pressure is coming in. Just like pairing wine and cheese make for a delicious snack , pairing candlesticks with technical indicators make for knowledgeable trading.
We teach how to trade bullish candlesticks on our live daily streams. Check out our trading service above to learn more.
Which Candlestick Pattern Is Most Reliable?
- Hammers – reliable reversal candlestick pattern found at support levels
- Shooting Star – looks like an inverted hammer and is a reversal near resistance levels
- Doji’s – good reversal candlestick pattern at either support or resistance levels
- Bull Flag – big green candlestick forms flag pole, followed by consolidation candles
- Bear Flag – big red candlestick forms flag pole, followed by consolidation candles
- Pennants – similar to flags but form pennants instead of flags
- Bullish Harami Patterns – large bearish candle body with a small bullish candle body contained inside
- Bearish Harami Patterns – large bullish candlestick with a small bearish candle body contained inside
- Morning Star – 3 candlestick bullish pattern found near support
- Evening Star – 3 candlestick bearish pattern found near resistance
Over time candlesticks group together to form patterns. Charts give valuable insight into a stock’s future. It’s all about price action. A bullish candlesticks pattern is giving you a signal about how to trade.
Reversal and confirmation patterns are always happening. You must pay attention to what the candlesticks are telling you. A pattern like the hammer is a bullish reversal pattern, potentially ending a downtrend. That means it may be signaling that the stock is nearing a bottom in a downtrend.
You always want confirmation before jumping into a trade as it could be a fake out. A reversal pattern must be validated by continuation and a rise in stock volume.
Bull flags are continuation patterns. A stock will move up, then trade sideways before continuing to move up again. Using patterns to trade is imperative. Candlesticks are always forming patterns on any chart time frame you use.
How to Trade Bullish Candlesticks
- Knowing how to trade bullish candlesticks is quite simple:
- Traders take a long position when price breaks above the high of the bullish candlestick.
- They use a candlestick close below the low as a stop level.
When you’re day trading, you’re buying and selling a stock multiple times in one day. The 1 and 5 minute charts are typically used for this. When you’re day trading you must be precise in your entries and exits.
Bullish candlesticks along with moving averages will help you tremendously. Just like daily charts, intraday charts form patterns but on a smaller scale.
Because you’re not holding the stock for more than a day, you need to find the patterns on the shorter time frames. It’s moving a lot quicker so you need to be pretty good at spotting these patterns. Take our candlesticks patterns course.
How Can You Tell a Bullish Trend?
A bullish trend forms when a stock forms higher highs and lower lows. Ideally you want to be able to connect at least two lows but three or more is better. Highs and lows are also known as peaks and valleys. You can create trend lines using drawing tools with your broker.
Swing Trading Them
Swing trading means you’re holding a stock at least overnight. Usually a swing trade last 3-6 days up to a couple weeks. Being able to read bullish candlesticks and patterns on a daily chart is absolutely necessary.
Patterns along with moving averages and candlestick charting show trend reversals, price action and support and resistance.
Making a bad swing trade can cost you a lot of money.
Studying bullish candlesticks is one of the most important steps you can take when you’re trading. There’s no crystal ball to see into a stocks future but candlesticks try to help you out as much as they can. Knowing how to take advantage of that only helps you.