A Chart Explaining Candlestick Patterns



• Bottom patterns: W bottom / multiple bottoms, breakout of the neckline = go long
• Top patterns: Head and shoulders top / rounded top, break below the neckline = exit
• Intermediate patterns: Rising flag / ascending triangle = continuation of rise; Falling flag / descending triangle = continuation of fall
• Expanding triangles have large divergence; do not open positions prematurely, wait for the trend to clarify

Trading principles: follow the trend, wait for breakouts, do not predict. Patterns are probabilistic signals; risk management is the key to trading.
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