Difference between Candlestick pattern and Chart pattern

Candlestick pattern

Chart patterns

Granularity

Candlestick patterns focus on individual price bars, typically representing short-term price movements within specific timeframes (e.g., minutes, hours, or days).

Chart patterns analyze a series of price bars or candlesticks over a more extended period, often focusing on daily, weekly, or even monthly data. They encompass a more significant timeframe than individual candlesticks.

Components

A candlestick consists of four main elements: open, close, high, and low prices for a specific time period. These elements are visualized as a rectangular shape with a "candlestick body" (the difference between open and close) and the vertical lines "wicks" or "shadows" (the high and low points).

Chart patterns involve the recognition of specific geometric shapes or formations in price charts. These shapes may include triangles, head and shoulders, flags, pennants, and rectangles. Chart patterns do not consider the open, close, high, and low prices of individual bars as their primary elements.

Market Sentiment

Candlestick patterns are primarily used to gauge short-term market sentiment. They provide insights into the battle between buyers (bulls) and sellers (bears) within the chosen timeframe. Different candlestick patterns convey various sentiments, such as bullish, bearish, or indecision.

Chart patterns are used to identify broader market trends, such as trend reversals or continuations. They provide insights into the overall supply and demand dynamics in the market.

Timing

Traders often use single candlestick patterns for timing entries and exits in the market. For example, a bullish candlestick pattern may signal a good time to buy, while a bearish pattern may indicate a potential sell signal.

While chart patterns can provide hints about potential trend changes, they are less precise for timing specific entry and exit points compared to candlestick patterns.

Examples

Common candlestick patterns include doji, hammer, engulfing, shooting star, and spinning top, among others.

Common chart patterns include ascending and descending triangles, double tops and bottoms, cup and handle, and head and shoulders, among others.

Summary

candlestick patterns offer insights into short-term market sentiment and are useful for timing entry and exit points within shorter timeframes.

Chart patterns, on the other hand, focus on broader trend analysis over longer periods and are less specific in timing trades but can be valuable for understanding the overall market direction.

Traders often use a combination of both candlestick and chart patterns to make well-informed trading decisions.