Bullish candlesticks are one of 2 different types of candlesticks that form on stock charts. The bullish candlestick and bearish candlestick. Watch our video below 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.
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. 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!
Bullish candlesticks make you aware of buyers. The more buyers there are the more price rises. These candlesticks are on every chart you use. Hence knowing how to read them is incredibly important.
Bullish candlesticks patterns tell you when a stock is in a bullish trend. Reading candlesticks is the first line of defense in technical analysis.
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 are viewing. Traders typically use candlestick charts from 1 minute candles all the way to monthly candles.
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. A nice full real body is telling you the stock is strong.
Knowing how to read candlesticks is the first and most important step to trading. 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. 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.
But 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.
Over time candlesticks group together to form patterns. Patterns 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 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.
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.
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 candlesticks 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.
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