What are the best practices for interpreting candlestick charts and making informed trading decisions?

The basics of candlesticks help a technical analyst to have a deeper insight in interpretation of candles patterns. Opening price and closing price is the first step. Identify a bullish candle (Open low and close high) and no the difference from a bearish candle (open high and close low). Understand the major components of a typical candlestick; candle body and wick/shadow/tail. Learn the origin of candles and know why some candle names are in Japanese, Harami candle for example. That helps in identification and relatability.

Candlesticks form patterns after series of formation and these formations determine if it is a continuation signal of a trend direction or a reversal pattern. Some continuation candlestick patterns are falling three method and rising three method. While some reversal candlestick patterns include engulfing and 3-inside up/down. The identification of patterns will help to anticipate in a direction informed decision.

Where a candle appears in the chart is important. For example a hammer candle, that is a candle with a small body and a long bottom wick, is a bullish indicator when it appears in the bottom of a down trend and a bearish indicator when it is at the top of an up trend. In general, candle stick patterns are used to signal trend reversals. As in all technical analysis concepts, a good technician waits for a confirmation and uses Western technical indicators alongside Japanese candle sticks to interpret charts.

The reversal and continuation patterns of candlesticks forming on a prominent support or resistance zone on higher timeframe means there is a clearer direction and confidence in such direction when similar or thesame pattern is formed on a lower timeframe. A swing on a lower timeframe may be a retracement on a higher timeframe and alot of traders may be trapped in that without knowing why. A technical analyst that understand candlesticks patterns interpretation on different timeframes would have been saved from such drawdown in the market. Higher timeframe helps to filter noises on the chart and makes trading easier for a trader by just identifying a candle pattern and other factors to consider before taking a trade.

Candlesticks are not just the magic doers, they can be harnessed further by incorporating other tools with them such as indicators like RSI. When bearish engulfing candlestick pattern formed at resistance and RSI is also indicating over-bought at 85 level. This is a good signal for a sell. Other factors may determine if the market will sell off immediately or later but it is a good confluence to look out for when combining candlesticks pattern with indicator.

Practise and backtesting is a huge task on the part of a technical analyst which takes time and perseverance. This process will enable practice, show the performance of trading strategy that was derived from candlestick patterns identification and also the risk-reward ratio of the performance. It provides insight in what needs to be done more and what needs to reduce or stop doing.

Sin duda la unica manera de entender que estas haciendo es con un largo estudio de backtest y sobretodo fowardtest ya que el backtest te jugara malas pasadas viendo que paso luego y puede modificar tu sesgo. Dependiendo del tiempo del grafico, minimo muestras de 100 trades.

As far as Pakistan's stock market is concerned, I have noted that there are players behind every share. If an Investor buys a share round 52 week's low and invest his own funds, which he / she is able to hold, looks more wise. When the share goes up with a high volume, the investor should sell the share and earn the profit. It is recommended to gather reasonable information before investing in any share. Unfortunately Pakistan's Political situation is unpredictable. The past proves anything can happen anytime, which is not a good sign for the stock market. The investment in the stock market should be done like as any other business investment. Generally people get impatient and like to earn in short time, which gives them a loss.

In my approach to trading, I predominantly rely on candlestick patterns for both entry points and confirmation. However, this method presents challenges, particularly when faced with the inherent uncertainty in market sentiment associated with interpreting candlestick patterns.