1. The Doji Candlestick Pattern
The Doji candlestick pattern is one of the most popular patterns for entries, primarily owing to its simplicity and effectiveness. The Doji candlestick is indicative of indecision in the market. It shows that the buying and selling forces are equated, and a shift in the market’s direction could be imminent. When a Doji pattern appears after an upward or downward trend, it may signal a potential trend reversal. Care must be taken to confirm this anomaly with an additional signal.
2. The Hammer and Hanging Man Candlestick Patterns
Another top pattern to be considered for entries is the Hammer and Hanging Man pattern. These patterns are premised on their shapes, which resemble a hammer and a hanging man, respectively. A Hammer points to a potential bullish reversal and appears toward the end of a downward trend. On the other hand, a Hanging Man pattern signals a bearish reversal and appears during an upward trend. These patterns show that the sellers or buyers tried to push the price but eventually failed, indicating potential exhaustion of the trend.
3. The Engulfing Candlestick Pattern
The Engulfing pattern is a powerful candlestick pattern that traders use to signal entries. An engulfing pattern occurs when a candle ‘engulfs’ or covers the entire previous candle, signaling a strong shift in the direction of the price. A bullish engulfing pattern indicates a potential rise in price, and it’s an ideal spot for a buy entry. Contrarily, a bearish engulfing pattern signals potential price drop and creates an excellent selling opportunity.
4. The Morning Star and Evening Star Candlestick Patterns
The Morning Star and Evening Star candlestick patterns are three-candle patterns that signal the end of a price trend and the possible start of a new one. The Morning Star pattern signals the end of a downward trend, providing trade entry points for a bullish market. Conversely, the Evening Star pattern signals the end of an upward trend, thus creating entry points for a bearish market.
5. The Shooting Star Candlestick Pattern
The Shooting Star pattern is a top reversal pattern that signals an uptrend’s end and the potential start of a downtrend. The pattern consists of a single candlestick with a small body and a longer upper shadow, giving it a shooting star-like appearance. When the pattern occurs after an upward trend, it is a strong sign to sell or open a short position.
6. The Piercing Line and Dark Cloud Cover Candlestick Patterns
The Piercing Line and Dark Cloud Cover candlestick patterns are another pair of commonly used entry indicators. The Piercing Line pattern is a bullish reversal signal occurring at the end of a downtrend, while the Dark Cloud Cover pattern signals bear resistance and precedes potential price drops.
All these patterns provide strategic entry points for traders by giving insights into possible market reversals. However, it’s important to remember, while these patterns provide a higher probability of predicting the market’s direction, they should be used in conjunction with other indicators and strategies for best results.
