Candlesticks in context

Prerequisite: A repeatable multi-timeframe process

On a small screen, scroll the figure sideways or open it full size.

Learning objective

Evaluate a candle using location, preceding movement and confirmation rules.

A recognisable candle is an observation, not a complete strategy. Its location matters: a lower wick in the middle of a quiet range describes something different from the same wick after a prolonged decline into a previously marked area. Describe the context before naming the shape.

Define confirmation before seeing the outcome. You might require a close beyond a particular candle high, but that rule delays recognition and can worsen entry distance. Compare versions using identical historical samples, fees and stop assumptions instead of declaring that confirmation always makes a pattern better.

Separate information available at decision time from later candles. A daily candle viewed at noon is incomplete, and a historical screenshot can make reversals look obvious. Save the chart at the moment of assessment and include examples that fail, disappear or remain undecided.

Common mistakes

Avoid switching timeframes until a desired pattern appears. More indicators based on the same candles are not independent evidence.

Practice

Collect ten candles with similar shapes at different locations. Record preceding trend, distance to a marked level and an explicit confirmation rule before viewing later prices.

Sources & further reading

• CMC Markets — Candlestick patterns explained