Even though there are many candlestick patterns and formation that traders use in making trading decisions, however there are three bullish candlestick patterns that give great buy signals. You should master these three bullish candlestick patterns. These three bullish candlestick patterns are:
1)- Morning Star 2)- A Bullish Engulfing Pattern 3)- A Tweezer Bottom
Now these three candlestick patterns can occur both in an uptrend as well as a downtrend. However, these patterns are of great value and offer great returns if spotted correctly in an uptrend. These patterns when they appear on a smaller time frame should be ignored which many times is nothing more than the end of a retracement on a larger time frame. If they appear in a sideways or consolidating market, they should again be ignored. However, when these three candlestick patterns appear in an uptrend they can be highly profitable. These patterns are ideal on 1 hour or higher timeframe charts.
When a Morning Star appear on a candlestick chart, it means that the bears are giving way to the bulls in the market and the investors have stopped selling. Buying is about to start soon. A Morning Star is formed when a large bearish candlestick is followed by one or more very small candles followed by a bullish candle that is 60% above the bearish candle.
More buyers have stepped in which has equaled the number of buyers and sellers. Soon the number of buyers will exceed the number of sellers in the market and the market is going to turn bullish. When traders spot the morning star pattern, they greedily start buying after the formation of the bullish candle starting a new rally in the market.
A Bullish Engulfing Pattern is formed when a large bullish candle is formed that engulfs the previous bearish candles. This is a strong signal that the market is about to reverse itself! When a Bullish Engulfing Pattern appear in the downtrend, it means the bottom of the downtrend has been reached and soon there will be more buyers in the market taking the prices up with them.
It is a bit difficult to identify the Tweezer Bottom on the chart for the beginners. But with experience, you will be able to correctly identify the Tweezer Bottom. A Tweezer Bottom signals that the sellers are feeling exhausted and soon buying will start in the market. A Tweezer Bottom is formed when a bearish candle is followed by more than one candles with small bodies and large wicks on their downside.
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