Candlestick patterns can be used to identify when to buy a share as was covered in Candlestick patterns for professional traders. They can also be used when tracking your shares to identify possible points to sell the share at. The following candlestick patterns are common patterns that can be used to identify when to sell your shares.

Shooting Star

The shooting star has a small body with a long upper shadow at least two to three times longer than the main body. The colour of the pattern can be either red or green and the candle can be open or solid. The shooting star is one of the most common candlestick patterns that are found in the market and very reliable. The shooting star indicates that a share is likely to go down when seen after a strong rise in the share price.

The shooting star shows that the share price rose strongly early in the day to reach a new high level. At the top of the shadow the profit takers stepped in to sell the share back down, near to where it opened. This wave of selling has stalled the up trend and it is now time to consider selling.

Hanging Man

The hanging man looks the same as a hammer. The difference between the two patterns is dependent on their location. A hammer is found after a share price has been falling while a hanging man is seen after a share price has been rising. The hanging man consists of a small body with a long lower shadow which must be at least two to three times the length of the main body for the pattern to be considered legitimate.

The candle can be red or green, open or solid. The Hanging Man shows that there has been a large sell off of shares during the day and this may have exhausted the up trend. If the next day’s opening price is less than the Hanging Man day’s close, prices will usually fall. If the next day’s price opens even, or above, then prices will usually crab sideways.

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