Candlesticks, Trend, Volume

The candlestick patterns every beginner really needs to know

There are dozens of candlestick patterns, but you only need a handful that keep showing up. Context is what matters: a reversal pattern only counts against the prior trend, otherwise it is just noise.

• Hammer: small body up top, long lower wick, buyers push price back up into the close.
• Bullish engulfing: a green candle fully wraps the body of the prior red candle.
• Pin bar: a long wick rejects a level, bullish when the wick points down, bearish when it points up.
• Only count a bullish pattern in a downtrend, and a bearish pattern only in an uptrend.
• Filter: only trade a reversal candle when an oscillator is oversold or overbought.

Why the closing price matters more than the high and low

The high and low are extremes, often driven by a single order or a stop hunt. The close is the real vote: where were buyers and sellers actually willing to trade at the end?

That is why a breakout only counts once a candle closes outside the level, not when the wick briefly spikes past it. In crypto, those wick spikes are the classic fakeouts used to clear out stops.

Reading volume correctly: is the market confirming the move?

Volume is your fastest lie detector. The basic rule: volume should expand in the direction of the trend. A breakout with no rise in volume is usually a false breakout, because it lacks participation.

• Healthy uptrend: higher volume on the up candles, lighter volume on the pullbacks.
• Bottoms absolutely need a volume spike (a selling climax), tops do not.
• A market can fall on inertia, but it can never rise on inertia.
• Volume precedes price: a shift in pressure often shows up in volume before the price.