Bullish Candlestick

Dragonfly Doji (Bullish)

a. How to recognise it?

• There must be a preceding downtrend.
• It looks like a "T".
• The opening, highest and closing price are the same.
• It has no real body but a long lower shadow.

b. What is the psychology behind?

• When the market opens, the bears drag the price all the way down, resulting in a long lower shadow.
• The bulls fight strongly and eventually manage to push the price back up to the opening level.
• The longer the lower shadow, the more effective the bullish signal. It tells us that the bulls are strong enough to conquer the bears who once dragged the price so low.

c. How do we trade it?

• Look for the Dragonfly Doji at the bottom of a downtrend.
• Wait for the next candle to close above the high of the Dragonfly Doji to confirm the existence of bullish force.
• Open a stop-loss below the low of the Dragonfly Doji.

Hammer (Bullish)

a. How to recognise it?

• There must be a preceding downtrend.
• It looks like a square lollipop with a long stick.
• The closing price is above or near the opening price, forming a tiny body.
• The real body could be green or red.
• It has no or little upper shadow.
• The lower shadow is at least twice the length of the real body.

b. What is the psychology behind?

• Similarly to Dragonfly Doji, when the market opens, the bears drag the price all the way down, resulting in a long lower shadow.
• The bulls fight strongly and conquer the bears by pushing the price above or near the opening level, forming a little square body.
• The longer the lower shadow, the more effective the bullish signal. It tells us that the bulls are strong enough to conquer the bears who once dragged the price so low.

c. How do we trade it?

• Look for the Hammer at the bottom of a downtrend.
• Wait for the next candle to close above the high of the Hammer to confirm the existence of bullish force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the Hammer.

Bullish Engulfing (Bullish)

a. How to recognise it?

• There must be a preceding downtrend.
• A shorter red candle followed by a longer green candle.
• The green candle opens lower and closes higher than the red candle, completely engulfing it.

b. What is the psychology behind?

• The red candle implies the control of the bears following a prolonged downtrend.
• In the next session, the market opens below the low of the red candle, suggesting the continuation of the bearish forces.
• The bears then lose momentum, the bulls take charge and lead the price up during the session, and eventually manage to close above the high of the red candle.
• The bulls have now fully overridden the bears.

c. How do we trade it?

• Look for the Bullish Engulfing at the bottom of a downtrend.
• Wait for the next candle to close above the high of the green candle to confirm the existence of bullish force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the green candle.

Piercing (Bullish)

a. How to recognise it?

• There must be a preceding downtrend.
• A red candle followed by a green candle.
• The green candle opens with a gap-down and closes at 50% or above of the real body of the red candle.

b. What is the psychology behind?

• The red candle implies the control of the bears following a prolonged downtrend.
• In the next session, the market opens below the low of the red candle, suggesting the continuation of the bearish forces.
• The bears then lose momentum, the bulls conquer and lead the price up during the session, and eventually manage to cover 50% losses or more from the previous session.

c. How do we trade it?

• Look for the Piercing at the bottom of a downtrend.
• Wait for the next candle to close above the high of the green candle to confirm the existence of bullish force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the green candle.

Tweezer Bottom (Bullish)

a. How to recognise it?

• There must be a preceding downtrend.
• A red candle followed by a green candle.
• Both candles have the same low.

b. What is the psychology behind?

• The candles in both sessions form the same low, suggesting that the market refuses to go below that price level. Once the price touches the floor, it bounces back. That price level may be viewed as short-term support.
• The closing price of the green candle shies away from the low further than the red candle does. It shows that the bullish forces are getting stronger.

c. How do we trade it?

• Look for the Tweezer Bottom at the bottom of a downtrend.
• Wait for the next candle to close above the high of the two candles to confirm the existence of bullish force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the two candles

Three White Soldiers (Bullish)

a. How to recognise it?

• There must be a preceding downtrend.
• Three consecutive long green candles observed.
• The second and third candle opens within the body of the preceding one but closes higher than the preceding one.

b. What is the psychology behind?

• The first long green candle signals that the bears are exhausted after the prolonged downtrend and the bulls start to take over. The bulls continue the rally with the subsequent two candles closing higher.

c. How do we trade it?

• Look for the Three Soldiers at the bottom of a downtrend.
• Wait for the fourth candle to close above the high of the third candle to confirm the reversal.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the first green candle.

Morning Star (Bullish)

a. How to recognise it?

• There must be a preceding downtrend.
• The first candle has a long and red body.
• The second candle opens with a gap-down and has a tiny green or red body.
• The third candle opens with a gap-up and closes at 50% or above of the first candle.

b. What is the psychology behind?

• The first long red candle implies the dominance of the bears in a downtrend.
• The gap-down of the second candle further confirms the bearish force but the tiny candle body tells us that the bears start to lose momentum.
• The gap-up of the third candle indicates that the bulls are overriding the bears and eventually manage or makeup 50% losses or more from the first long red candle.

c. How do we trade it?

• Look for the Morning Star at the bottom of a downtrend.
• Wait for the fourth candle to close above the high of the third green candle to confirm the existence of bullish force.
• Open a long position upon confirmation.
• Place a stop-loss below the low of the second candle.