A candlestick displays the high, the low, the opening and the closing price of a coin over a specific period (usually very short).
A green candlestick means that people are buying and the price is increasing (bullish movement), whereas a red candlestick means that people are selling and the price is decreasing (bearish movement).
The engulfing candlestick
The engulfing candlestick happens when you have a given candlestick (let’s say a green one) and right next to it, you have a taller candlestick of the opposite type (so in this case, a taller red one). Or viceversa. Depending on which combination you have (short red – tall green or short green – tall red), this can indicate a bullish movement or a bearish movement and are therefore called bullish engulfing pattern or bearish engulfing pattern.
Bearish engulfing pattern
Bullish engulfing pattern
In these 2 examples, black corresponds to the red candlesticks (sell) and white corresponds to the green candlesticks (buy).
So these engulfing patterns can indicate what will happen with the price in the immediate period of time – either goes through a bearish or a bullish movement.
A hammer candlestick occurs when a coin trades significantly lower than the opening price, but rallies back later in the day to a closing price of either above or near the opening price.
The hammer is a green candle and is normally a strong reversal indicator of a downtrend, so it means that the price is about go up. The red version of the hammer is the Hanging Man.
Hanging Man candlestick
The Hanging Man occurs at the end of an uptrend. It is a red candle and is normally a strong reversal indicator of an uptrend, so it means that the price is about to drop.
Doji is a candlestick pattern that looks like a cross or like a plus sign. They are usually neutral patterns and they form when the opening and closing a price of a coin are equal for a given period of time – in lay terms, it means that both buying and selling are taking place in roughly the same amounts.
It generally signals a reversal in the current trend.