Can You Tell If A Stock Is Going Up Or Down With Candlestick Patterns?
In technical trading,a simple candlestick pattern is an up or down trend displayed graphically over a candle graph that some believe can predict an upcoming market movement. The recognition of the pattern itself is usually subjective and automated programs that are widely used in charting must rely upon rules that are predetermined to follow the fad. These patterns are generally displayed as a series of horizontal lines that represent either a rising or falling trend. The simple idea behind the routines is straightforward; the more the time period of the line,the higher the probability of the trend continued.
Many investors will purchase a stock based on the idea it will go up or down based on the candlesticks pattern used by their charting applications. But while this idea may be tempting,it is really not a great one. The reason is that all trends can vary from day to day and even hour to hour. There are times when the market can go up but thendrop whenever you depart the stock market.
Another problem with using candlesticks patterns in your graphs is they do not supply you with a means of identifying a fad. What the graphs does is enable you to easily see if the market has obtained a certain pattern and moved on. Therefore,it is very important to know when to look at the graph and when to look away from it.
While most stock exchange patterns can be hard to interpret,it is possible to find a better sense for the tendency by paying close attention to the quantity. To put it differently,if the stock is making a sudden increase in volume,there is a very good possibility it will probably be going up and if it’s been decreasing for a little while,it might indicate that the trend is beginning to turn downward.
Candlestick patterns are a very good way to gauge the market’s direction and help you get an understanding of the market. However,keep in mind they cannot tell you the way in which the market is led and can only supply you with a guidepost.
There are a number of other indicators that can give you a better sense for the way the stock exchange is heading. The most important point to remember is that most of them are distinct and the best ones are those that you locate that give you a sense of consistency.