As you all know how much easier candlestick has made our trading. Today we will discuss about top 12 best candlestick patterns for swing trading. If candlestick patterns are identified in the chart at the right time then it can give a good profit that too in short period of time. That is why all successful traders mostly trade on candlestick chart patterns. Here are the top 12 best Candlestick patterns for swing trading.
- Hammer Candle
- Bullish Engulfing Pattern
- 3 White Soldier
- Morning Star
- Shooting Star
- Bearish Engulfing
- Three Black Crows Pattern
- Evening Star
- Bullish Flag Pattern
- Bearish Flag Pattern
- Ascending Triangle Pattern
- Descending Triangle Pattern
Understanding Candlestick Charts
Candlesticks charts are nothing but a graphical representation of price movement in a particular stock or securities. If the close of the candlesticks is lower than its open then the candlestick is colored red which indicates a decline in stock price. In same manner if the closing price is higher than the opening price then a bullish and green candle formation occurred on chart. A series of these candlesticks in a given time period forms a candlestick chart. Candlestick charts helps trader to identify if the chat following any pattern as it did in the past. Basically all instruments follows its past patterns on the chart.
Benefits of using Candlestick Charts in Swing Trading
Candlestick charts have many benefits for swing trading as they help you identify running trends, trend reversals, and the top and bottom of any moving trend. How to recognize reversal, top and bottom from chart pattern, we will see further in this blog. Please read the dedicated blog for more benefits of candlestick Charts.
Bullish Reversal Patterns
Introduction to Bullish Reversal Patterns : Best Candlestick Patterns For Swing Trading
Reversal in any trend is the most important part in your trading. If you become expert in spotting reversals, you can be on your way to becoming a successful trader. Reversals can be of two types – bullish reversal and bearish reversal.
Bullish reversal occurs in a downtrend and the below mentioned candlestick pattern can be useful in identifying it.
The Hammer candlestick is considered as the best Candlestick Patterns For Swing Trading if it formed in any instrument. Hammer candles are equally effective if formed after a long downtrend. However, its effect become more if the timeframe used in chart is longer. If a hammer candle is formed in the daily timeframe then the possibility of trend reversal is more likely as compared to the 5 minutes timeframe. The long wick below the body of the hammer candle shows that the bear slow down and the bull taking charge now.
Bullish Engulfing Pattern
Bullish engulfing is another trend reversal candle pattern. In this, the last candle of the downtrend is completely covered by a bullish candle. Well, it works in any trend but if this pattern is formed after a downtrend, the chances of confirmation are very high. In this pattern basically the body of the red candle must be completely engulfed by the green candle irrespective of the shadow. However, it is better that the bullish candle engulfs whole bear candle including the shadows.
3 White Soldier
Three white soldier is also one of the reliable candlestick pattern for trend reversal in upside direction. In this, after a long downtrend, 3 green or white candles are formed one after the other and the close of one candle is above the close of the previous candle. Although there is a possibility of some correction because the market has already moved a lot but it indicates overall bullishness. Below is the example of 3 white soldier.
Morning star is also a bullish chart pattern. This is a pattern of 3 candles which includes a big red candle which is in a downtrend followed by a doji or spinning top candle which open gapdown below the red candle and then a big green candle which open gap-up. The body of the Doji candle should not interact with the body of the red candle and green candle. This pattern means that the bears have gained strength in the market but suddenly many bulls have entered the market. Generally, this pattern is formed in the market after any news or announcement.
Bearish Reversal Patterns
Introduction to Bearish Reversal Patterns
Bearish reversal patterns help in identifying the end of the uptrend and there may be a correction or change of trend in downside. Although a bearish trend can be used only in stock options or futures, it is still very useful to identify it. Like bullish reversal, there are a few chart patterns that can be identified by starting a bear trend. Identifying the bear trend can make more profits because the upward movement in the market is steady but the downtrend movement is very fast. Below are some of the most effective and Best Candlestick Patterns For Swing Trading as bullish reversal patterns to trade for becoming successful in trading.
Shooting star is simply the opposite of a hammer candle. This is a candle pattern formed in an uptrend in which the upper side is a long shadow and the lower side is a short body. This generally indicates that the bulls are losing interest and the uptrend is about to end. The color of this candle can be red or green, the color does not matter. It is also the Best Candlestick Patterns For Swing Trading, See the example below.
Bearish engulfing is another powerful pattern known to identify a down trend in the live market. This is a 2-candle setup in which a small green candle formed at the top which is in an uptrend completely engulfs by a large red candle. The top green candle shows that the bulls are not interested in taking the market up and the big red candle is dominating here to take the market down.
Three Black Crows Pattern
Three black crows pattern is just the opposite of three white soldier. In this, three red or black candles are formed one after the other and the close of one candle is higher than the close of the other candle. If this pattern is shown in an uptrend then trend reversal can be expected and comprises a best Candlestick Patterns For Swing Trading.
Evening star is a pattern of three candles formed at the top of an uptrend. In this setup a small candle is formed between 2 large red and green candles (see below picture). In an uptrend, a small candle is formed above the green candle which opens gap-up, followed immediately by a large red candle which opens as gap-down. The trend reversal is very strong if the body of the large red candle crossed the body of the first green candle and no doubt it is also the Best Candlestick Patterns For Swing Trading.
When a stock remains in trend for some time and then consolidates and then continues the trend, it is called a continuation pattern. Continuation pattern is of few types and some of them are given below.
Bullish Flag Pattern
In Bullish flag pattern, the price gives a sharp upside movement which forms the pole of the flag, after which there is consolidation in the stock which forms the flag. When there is a upside breakout of the flag pattern and the trend continues again then there is a trading opportunity in the stock. This is a trustable and good strategy to become a profitable trader. The flag pattern also gives a signal to stay in the stock so that the entire trend can be enjoyed.
Bearish Flag Pattern
In Bearish flag pattern, the price gives a sharp downside movement which forms the inverted pole of the flag, after which there is consolidation which is slightly neutral to upside in the stock which forms the flag. When there is a downside breakout of the flag pattern and the trend continues again.
Ascending Triangle Pattern
Ascending triangle is also a type of continuation pattern, it is also like a flag pattern but it has a longer consolidation period and the consolidation period formed in the shape of a triangle which is slightly upside direction as shown below. When the breakout of the triangle happens in the upside direction then the trend starts again. Commonly the breakout happens near the 70% of the triangle is considered as a good ascending triangle pattern to trade.
Descending Triangle Pattern
Descending triangle is just opposite of the ascending triangle and occurs in downside trend. In this pattern consolidation period formed in the shape of a triangle which is slightly in downside direction as shown below. When the breakout of the triangle happens in the downside direction then the bearish trend starts again. Commonly the breakout happens near the 70% of the triangle is considered as a good ascending triangle pattern to trade.
There is no doubt that candlestick patterns are useful in the market but mastery in identifying them depends on your practice and intelligence. If you want to gain mastery in swing trading then it is very important to follow the candlestick pattern. Bullish Engulfing and hammer candlestick pattern is best Candlestick Patterns For Swing Trading to make your swing trading journey successful.
Frequently Ask Questions
- What is most profitable candlestick pattern?
Ans. Although all patterns are profitable, the only condition is that they should be applied with patience and emotions should be kept away.
- Are these candlestick patterns applicable to all markets?
Ans. Yes, these are applicable to all financial markets.
- How log will it take to gain mastery in swing trading?
Ans. Mastery in any field required patience and hard work, so to become master you need to follow the rule potentially.
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