Most candlestick indicators are reversal patterns; however, periods of trends exist and signifies rest. According to the Japanese insight, "there are times to buy, times to sell, and times to rest."
When a pattern is recognized, it only means that a direction is expected for future price movements.
The continuation patterns that are found in candlestick charting allows traders to improve their decision-making process. Any pattern involves decisions to be made, as well as if the decision is to do nothing.
Candlestick patterns are commonly used in trading charts to determine reversals, but continuation patterns do exist. The name itself suggests a continuous pattern that gives you confirmation if the trend will likely continue.
When a trader analyzes a stock’s price chart, the movement is exposed to a complete random trend. This is often true and recognizes those price movements as patterns. Chart patterns are geometric shapes that are usually found in the price data, which allows a trader to deeply understand the movement of the price, as well as predict about where the price is likely forwarding.
Three Continuation Patterns:
· Rising window
The gap between the first and second candlestick is called the rising window as its trend moves in an upward position. On the other hand, if the trend goes down, it is called a falling window – in this case, the chart illustrates an upward gap.
As shown in the chart above, the gap separates two candlesticks positioned in a bullish trend. The second bar misses to fill the gap, thus it is called as the “closing the window.” The gap between the two price candlesticks is a considered as a confirmation of the existing trend, and the market’s refusal in the next session to go back and fill the gap is a further confirmation that the trend is just fine.
· Three white soldiers
The chart illustrates a pattern with a three large white candlesticks in a row. Witnessing the close consistently over the open for three consecutive days is a confirmation that the price series is in an uptrend, while the size of the candlesticks suggests its robustness.
· Three black crows
Three black crows is basically the opposite of the three white soldiers, only with black real bodies. The chart illustrates a pattern with three periods of the close under the open and lower each time, with the same size of candlesticks. Thus, the price bar series is considered as a downtrend.
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