The categorisation of formations

The categorization of candlestick formations can help provide insight into the reliability, role, and expected trend of the pattern.

• Reliability: The reliability of a candlestick pattern can vary depending on the specific formation and the context in which it appears. Some patterns, such as the Hammer and Shooting Star, are considered to be more reliable than others. However, it's important to note that no single pattern can guarantee a change in trend.
• Role: The role of a candlestick pattern is to provide information about market sentiment and potential price movements. Reversal patterns indicate that a change in trend is likely to occur, while continuation patterns indicate that the current trend is likely to continue.
• Expected Trend: The expected trend of a candlestick pattern is based on the direction of the pattern and the context in which it appears. For example, a Hammer pattern is considered a bullish reversal pattern and indicates that a bullish trend is likely to occur. On the other hand, a Shooting Star pattern is considered a bearish reversal pattern and indicates that a bearish trend is likely to occur.

It's important to note that while candlestick patterns can provide valuable insights into market sentiment and potential price movements, they should not be relied on exclusively. These categories are shown in this lesson.