How are candle sticks used in trading?
> Candle sticks are 1 of 6 elements (indicators being a support tool) used to understand the price action on a chart.
As you gathered, the others are:
1) Candle sticks
2) Support and resistance
4) Moving Averages
5) Fibonacci levels
It is very important you understand candle sticks and their many possible combination, for candle stick and their associated grouping can contribute to determine if its a bullish or bearish price action to follow.
Its not as important to memorize each of these formations, however if you do, its a good thing, especially the following below.
One can always refer to a source of listed candlesticks. Here is our list and growing >
Candle stick patterns that you must pay extra or special attention to include:
Single candle sticks :
Shooting star, Hammer, Pin Bar, Doji and Marubozu
2 candle stick combination patterns :
Tweezer tops and bottoms, Harami and engulfing candles
3 candle stick combination patterns :
Morning star, Evening Star, 3 inside up or down, 3 white soldiers, 3 black crows.
What is important is for you to understand is why the candle or combination of them are bullish or bearish by just looking at them. Refer to the reference page to see how they are identified. Note the comments < strong, reliable or weak formation.
a) Candle sticks help tell you what is happening but it must be in context of where they occur, known resistance or support levels.
b) Candle sticks should not be used in isolation to generate trading signals.
There are too many other factors that impact price action however candlesticks are helpful, when used correctly in conjunction with volume and volatility with other major elements on a chart (with support, resistance and trendline).