Section 4 - Chapter 2 - Introduction to candlestick.pptx

Section 4 - Chapter 2 - Introduction to candlestick - Presented by Rohan Sharma - The CMT Coach - Chartered Market Technician CMT Level 1 Study Material - CMT Level 1 Chapter Wise Short Notes - CMT Level 1 Course Content - CMT Level 1 2025 Exam Syllabus Visit Site : www.learn.ptaindia.com and www.ptaindia.com

1. Chapter 2 – Concept of C andlestick P attern Section 4 – Chart Pattern Analysis Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

2. Agenda Introduction to Candlesticks Introduction to Candlestick Charts Construction of Candlestick Charts: The Four Key Data Points Time Frames: The Versatility of Candlestick Charts Interpreting Candlesticks: Insights into Market Sentiment Application Across Markets This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

3. Understanding Candlestick Candlestick charts are a popular tool used in technical analysis to visualize price movements of financial assets, such as stocks, forex, and cryptocurrencies. They provide valuable insights into market sentiment and potential price trends Structure of a Candlestick Each candlestick consists of: • The Body – Represents the range between the opening and closing prices. • The Wick (or Shadow) – The thin lines above and below the body, showing the high and low prices. • Color – Typically, green (or white) indicates a price increase (bullish candle), while red (or black) indicates a price decrease (bearish candle ). This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

4. Understanding Candlestick Construction of Candlestick Charts: The Four Key Data Points Candlestick charts are built using four essential price data points for a specific time period (e.g., 1 minute, 1 hour, 1 day, etc.). These data points help traders and analysts visualize market sentiment and price movements. 1. Open Price • The price at which the asset starts trading at the beginning of the time period. • It forms the top or bottom of the candlestick body, depending on whether the price moves up or down. 2. Close Price • The price at which the asset finishes trading at the end of the time period. • This value determines the direction of the candlestick: o If the close price is higher than the open price, the candlestick is bullish (usually green or white). o If the close price is lower than the open price, the candlestick is bearish (usually red or black ). This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

5. Understanding Candlestick Construction of Candlestick Charts: The Four Key Data Points 3 . High Price • The highest price reached during the time period. • It is marked by the upper wick (or shadow) of the candlestick. 4. Low Price • The lowest price reached during the time period. • It is marked by the lower wick (or shadow) of the candlestick . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

6. Understanding Candlestick This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

7. Understanding Candlestick This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

8. Understanding Candlestick Common Time Frames 1. Intraday (Short-Term) o 1-Minute, 5-Minute, 15-Minute, 1-Hour Candlesticks o Used by day traders and scalpers to analyze quick price movements. o Suitable for high-frequency trading and short-term strategies. 2. Daily and Weekly (Medium-Term) o Daily Candlestick (1-Day) – Common among swing traders. o Weekly Candlestick (1-Week) – Helps identify broader trends and market sentiment. 3. Long-Term (Investors & Position Traders) o Monthly Candlestick (1-Month) – Provides an overview of long-term trends. o Yearly Candlestick (1-Year) – Used for long-term investment analysis . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

9. Understanding Candlestick This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

10. Understanding Candlestick Choosing the Right Time Frame • Scalpers: Prefer 1-minute to 15-minute charts for rapid trades. • Day Traders: Use 5-minute to hourly charts to spot intraday trends. • Swing Traders: Rely on daily and weekly charts for trend analysis. • Investors: Focus on weekly, monthly, or yearly charts for long-term growth . The choice of time frame depends on your trading style, risk tolerance, and market conditions. Would you like insights on how to combine multiple time frames for better analysis? This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

11. Interpreting Candlesticks Interpreting Candlesticks: Insights into Market Sentiment Candlestick charts provide valuable insights into market sentiment by visually representing price action within a specific time frame. By analyzing the shape, size, and color of candlesticks, traders can gauge the balance between buying and selling pressure. Key Aspects of Candlestick Interpretation 1. Body Size – Represents the difference between the open and close price. o Large Body: Indicates strong buying or selling momentum. o Small Body: Suggests market indecision or consolidation. 2. Wick (Shadow) Length – Represents price extremes during the time period. o Long Upper Wick: Shows strong buying pressure followed by selling, signaling possible weakness. o Long Lower Wick: Shows strong selling pressure followed by buying, signaling potential strength. 3. Candlestick Color – Indicates whether the price moved up or down. o Green (or White): Bullish candlestick (Close price > Open price). o Red (or Black): Bearish candlestick (Close price < Open price).

12. Market Sentiment Reflected in Common Candlestick Types • Bullish Candlestick (Strong Buying Sentiment) o Large green body with little or no wick. o Indicates strong buying interest and potential continuation of an uptrend. • Bearish Candlestick (Strong Selling Sentiment) o Large red body with little or no wick. o Signals strong selling pressure and potential continuation of a downtrend. • Doji (Indecision) o Open and close prices are nearly equal, forming a small body. o Indicates uncertainty and potential trend reversal .

13. Market Sentiment Reflected in Common Candlestick Types • Hammer (Reversal Signal) o Small body with a long lower wick. o Shows strong rejection of lower prices, often signaling a bullish reversal. • Shooting Star (Bearish Reversal) o Small body with a long upper wick. o Indicates a failed rally, suggesting a potential downtrend.

14. Application of Candlestick Charts Across Markets Candlestick charts are widely used in various financial markets due to their ability to provide clear and insightful visual representations of price action. Traders and investors apply candlestick analysis across different asset classes to identify trends, reversals, and trading opportunities. 1. Stock Market • Used by traders and investors to analyze price movements of individual stocks. • Helps identify bullish or bearish trends, reversals, and breakouts. • Commonly combined with technical indicators like moving averages and RSI. 2. Forex (Foreign Exchange) Market • Candlestick charts are essential for currency traders to track exchange rate fluctuations. • Short-term traders rely on patterns like Doji , Engulfing, and Pin Bars for entry/exit signals. • Works well with support/resistance levels and momentum indicators.

15. Application of Candlestick Charts Across Markets 3. Cryptocurrency Market • Given the volatility of cryptocurrencies, candlestick analysis is crucial for traders. • Patterns such as Bullish Engulfing and Shooting Stars help navigate rapid price swings. • Used across various time frames, from minutes to months. 4. Commodity Market • Traders use candlestick patterns to analyze price trends in gold, oil, and other commodities. • Helps in identifying supply-demand dynamics and economic event impacts. • Works well with volume analysis and fundamental factors. 5. Index & ETF Trading • Broad market indices (e.g., S&P 500, NASDAQ) and ETFs also follow candlestick trends. • Provides insights into overall market sentiment and sector performance. • Often paired with economic indicators and macroeconomic analysis.

16. Understanding Candlestick Key Takeaways 1. Single-Candle Patterns (Candles in Isolation): These are individual candlesticks that provide signals about potential reversals or continuations. Often weaker signals than multi-candle patterns, but useful when combined with volume, support/resistance, or other indicators. Examples : Doji , Hammer, Shooting Star, Marubozu , Spinning Top. 2. Multi-Candle Patterns (Candles in Patterns): These consist of two or more candles, providing stronger and more reliable signals than single-candle formations. Useful for identifying trend reversals, breakouts, or continuations. Examples : Engulfing Patterns, Morning/Evening Star, Three White Soldiers, Three Black Crows, Harami . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

17. Understanding Candlestick Patterns: Single vs. Multi-Candle Patterns Key Takeaways 3 . Why It Matters: Single candles help detect immediate price sentiment but should be confirmed with context. Multi-candle patterns provide stronger confirmation of market direction. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

18. Understanding Candlestick Patterns: Single vs. Multi-Candle Patterns This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Pattern Type Example Patterns Market Signal Interpretation Single-Candle (Isolation) Doji, Hammer, Shooting Star, Marubozu Weak signal, needs confirmation Price indecision or trend pause Multi-Candle (Patterns) Engulfing, Harami, Morning/Evening Star, Three Soldiers/Crows Stronger signal, confirms trend shifts Higher probability of trend reversal/continuation Single-Candle with Support/Resistance Hammer at Support, Shooting Star at Resistance More reliable than in isolation Can trigger entry/exit signals Multi-Candle with Volume & Indicators Engulfing with RSI Divergence, Morning Star with Rising Volume High-confidence trade signal Strong market conviction

19. Chapter 3 – Introduction to candlestick patterns Next Section 4 – Charts pattern analysis Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia