Candlestick Pattern
A visual representation of price movements used in technical analysis to predict future price direction.
Definition
Candlestick patterns are a form of technical analysis that uses the shape and color of candlestick charts to predict future price movements. Each candlestick shows four data points: open, high, low, and close for a specific time period. The body represents the range between open and close, while the wicks (shadows) show the high and low. Common bullish patterns include hammer, morning star, and bullish engulfing. Common bearish patterns include shooting star, evening star, and bearish engulfing. Doji candles (where open and close are nearly equal) signal indecision. Candlestick analysis originated in 18th-century Japan for rice trading and remains one of the most popular charting methods worldwide.
Related Terms
Technical Analysis
A method of evaluating securities by analyzing price charts, patterns, and statistical indicators.
TradingSupport and Resistance
Price levels where buying or selling pressure is strong enough to prevent further price movement.
TradingMoving Average
A technical indicator that smooths price data by creating a constantly updated average price over a specific period.