Types of Candlestick Patterns

A continuation pattern is a price pattern that indicates a momentary break in an existing trend.

A continuation pattern is a pause in a dominant trend—a time when the bulls catch their breath during an uptrend or the bears rest for a little while during a decline. It's impossible to predict whether a trend will continue or reverse while it's emerging. As a result, it's critical to pay close attention to the trendlines used to form the price pattern, as well as whether the price breaks above or below the continuation zone. Typically, technical analysts advise that a trend will continue unless it is proven to have reversed.

In general, the bigger the price movement inside a price pattern and the longer it takes to develop, the more dramatic the move after price breaks above or below the region of continuation.

A continuation pattern occurs when price follows its trend. The following are examples of common pattern continuations:

• Doji
• Rising & Falling Three Methods
• Rising & Falling Window
• Spinning Top
• High Wave

Reversal patterns might indicate that the bulls or bears have lost control and that a trend change is on the way. There will be a halt in the current trend, after which the price will move in a new direction from the other side (bull or bear)

A distribution pattern is a reversal that happens during market peaks, in which the traded item is quickly sold rather than acquired. The opposite of a reversal that occurs during market bottoms is an accumulation pattern, in which the item is traded more aggressively acquired than sold.

The most common reversal patterns are:

• Hammer
• The Morning Star
• Three White Soldiers
• The Evening Star
• Three Black Crows