In the world of financial markets, stories are not told with words, but with candles. Silent candles stand on the lines of charts, telling tales of the struggle between buyers and sellers, and whispering to the insightful analyst about what is to come, if they listen well.
The beginning of the way: Basics of charts
Charts are the visual tongue of the markets, and among the most famous are: line charts, bar charts, and then the most used and influential: Japanese candlestick charts.
Each candle represents a time period, revealing four secrets: opening price, closing price, highest point, and lowest point. The magic lies in its shape, as its color (green/upward, or red/downward) tells you about the market's condition, and its upper and lower wicks reveal hidden struggles that numbers alone do not show.
Candlestick patterns: the hidden language of the market
Over time, traders learned repetitive patterns in candlestick behavior; shapes that repeat themselves as if they are the market's signatures on its decisions. Among the most prominent of these patterns:
Hammer: appears at the bottom of a downward trend, its body is small and its wick is long, heralding the birth of a new upward movement.
Hanging Man: stands at the peak of an upward trend, indicating buyer weakness and possibly the beginning of a reversal.
Engulfing: a strong candle that engulfs the previous one, announcing the dominance of one side.
Morning/Evening Star: three-pattern formations that signal a change in trend, combining hesitation then resolution.
These are not just artistic shapes, but psychological signals; they indicate when sellers were afraid, when buyers hesitated, and when one of them decided the battle.
Chart patterns: trend and breakout maps
Alongside the candles, larger patterns formed by price movement over time appear, used to identify trends or reversals or breakouts. Among the most prominent are:
Head and shoulders: one of the strongest reversal patterns, appears at peaks or troughs, indicating the exhaustion of the trend and its readiness to leave.
Triangles: represent a struggle between buying and selling pressure, and warn of an impending explosion.
The ascending triangle often breaks upward.
The descending triangle often breaks downward.
Flags and banners: appear in the middle of the direction, as if the market is catching its breath before continuing the way.
Price channels: show a regular trend within parallel lines, used for entering and exiting during the continuation of the trend.
My vision: when the market whispers, listen to its details.
My personal vision in analysis starts from a simple principle: "Every pattern carries intent."
I first look for the place before the shape. I do not care about the hammer candle if it is not at a clear bottom, nor do I rely on the head and shoulders pattern if a clear trend has not formed yet.
As I monitor volume, a strong candle without strong volume may be deceptive.
I always look for consolidation before an explosion, as the market usually catches its breath before taking off or dropping, leaving traces in the form of triangles or sideways ranges.
In the end, I do not rely on a single pattern, but combine several indicators: candles, patterns, indicators, and time context, to formulate a balanced decision that does not depend on momentary intuition, but on a calm reading of the complete scene.
Conclusion
Candlestick and chart patterns are not magical predictions, but tools that reflect human nature in the markets: their fear, greed, patience, and hesitation. Those who master deciphering them come closer to understanding the market, not as reckless speculators, but as artists reading the rhythm of the battle in the silence of the candles.