Interesting interpretation possibilities gives this chart representations a trader, which I will discuss in the following sections. It is particularly significant and important for many traders to see a trend reversal. This is not easy in most cases and requires a lot of practice.

Hammer/Pincandle: Candle with long wick and small body

The Hammer (Pincandle) has a long wick and a small candle body. We can see that in a certain period of time the price rose extremely and then immediately fell again. As a result, this wick and a high or low is formed. This is the possible sign of a trend reversal.

Additional interpretations say that in this candle many market participants were absorbed. All buyers (bearish pincandle) who were long in this candle are down after the close of the candle and may have to close the position. This may accelerate the trend reversal.

As a skilled trader, you know that this candlestick formation depicts a so-called "V" in the market. The market shot in exactly one direction and reversed right back. This candle often occurs where stop losses (risk limits) were triggered by other traders. Many traders use this knowledge to enter the market directly.

Pincandle characteristics:

•     Long wick
•     Small candle body
•     Trend change directly in the candle
•     Buyers or sellers are surprised and may have to close positions

Pattern recognition with the help of the candlestick chart

Candlestick formations can be linked to a wide variety of trading strategies. Whether indicators or just the chart, a trader can personalize his trading style. In the image below we see the function of a pincandle in connection with a resistance point in the chart at https://exnesslatam.com/trading-de-energias/. Candle formations can act as an entry signal here.

Resistance or support forms at certain prices in the market. This occurs because the majority considers certain prices to be particularly expensive or cheap. The market moves supply and demand. If such a spot is identified, you can use the hammer (pincandle) to find the optimal entry point! These patterns often occur at the edges of a sideways phase.

Resistance is a price point at which the market has already been several times and has managed in vain to break through it. Very often one sees then the hammer as a reversal signal. With the right analysis, this candlestick formation can also be used in a trend.

Personally, it is even enough for me to trade only a certain candlestick formation at market levels. This prevents false signals for me and I can focus entirely on a simple strategy.

Tips for candlestick analysis: 

•     Hammer or Pincandle is very suitable for a trend reversal
•     Watch out for this candlestick formation at prominent levels in the market
•     Simplicity is better in the end
•     Wait until the price comes to an important point in the market

My conclusion about the candlestick chart and analysis

On this page I have given you a detailed explanation of the well-known candlestick formations. You should now be able to read them correctly. From my experience, you need some practice here as a beginner until you are completely familiar with the display.

The candlesticks offer a trader more information than a normal line chart, which is why it is advisable to switch to candlestick formations. There are endless formations and strategies on this topic worldwide.

My personal tip is to make your own trading style and refine it little by little. Conduct your own backtests with candle formations or actively apply them in trading.