The Japanese Candlestick theory forms the foundation of most Technical Analysis used to read and analyze the market movements and determine where the market is heading. Engulfing Engulfing Bullish Bullish Engulfing, as the name explains the green candlestick engulfs the red candlestick. It happens at the bottom of the market trend. There are two conditions for this to take place.

The market must be in a clear downtrend and the two candles must engulf; the second real body green must engulf the first. The engulfing pattern also acts as a support and resistance. Engulfing Bearish Bearish engulfing is the opposite of the bullish engulfing.

Also, the market must be in a clear uptrend. The engulfing pattern also acts as support and resistance. Dark Cloud Cover Dark Cloud Cover This pattern is called Dark-cloud cover. The condition for this pattern to occur is the market must be in a strong uptrend and the market must open above the high of the previous bar and the closing price must be towards the low. The pattern is reliable, depending how low it closes.

The highest high of the two candles acts as a resistance. Can you look at the charts and identify the patterns? Piercing Line Piercing Line The piercing pattern is the opposite of the Dark — cloud cover and it happens in the bottom of the market. As the name explains, the price pierces the previous bar. The condition for this pattern to occur is the market must be in a strong downtrend and the market must open below the low of the previous bar and closing price must be towards the high.

This pattern is reliable on depending on how high it closes. Remember the lowest low also acts as support. Harami Harami Bullish Harami Bearish Harami pattern is a small real body that is contained within the long black or white real body.

Harami in Japanese means pregnant. Harami can be bullish or bearish, depending on its position. If it happens after a prolong uptrend then it is Bearish Harami.

In western, they call it as inside day. The range of the current candlestick is within the previous candlestick. You need to have confirmation when you see this signal. Doji Doji This is one pattern that we would consider very reliable; looking at it carefully can give you a lot of conclusion. It is called Doji in Japanese, Just by looking at it fundamentally; you can conclude the bulls and bears have neither won the battle. the opening and closing price is almost the same.

This pattern is very reliable especially if it happens after a pro long uptrend or down trend. One condition to apply in trading with this trend is, the market must give you a confirmation that it has already turned.

Gravestone Doji This is called a gravestone Doji in Japanese. It has got its name, the bulls who bought after they see gravestone Doji in an uptrend and going to get killed.

Especially you see a next day to be a lower close. Dragon Fly Doji This is called dragon fly Doji. It is the opposite of the gravestone Doji. It usually occurs on the bottom. The name is given because, after you see this pattern and you turn bullish you can fly like dragon fly.

Belt Hold Belt Hold Bullish Belt Hold Bearish Bullish belt hold line is a strong white or green candle that opens on the low of the session and closes on the high with a very small higher shadow. Bearish belt —hold line is a strong black or red candle that opens on the high of the session and closes on the low with a very small lower shadow. The longer the height of the belt holds with the heavy volume the more significant it becomes.

Counter Attack Counter Attack Bullish Bullish Counter Attack lines are formed when opposite coloured candles have the same closing price. The bullish counter attack lines gap opens on the low and closes on the previous closing price. TrendSpider charts also provide candlestick recognition tools and scanners to scan for your favorite forex candlestick setup! Doji candlesticks have almost the same opening and closing. Meaning they have very small real bodies like a thin line.

A Doji reflects the confusion or indecision period in the market. The signal can be confirmed with the help of another candlestick pattern. There are several variations of a Doji. These dojis have long upper and lower wicks and a small real body in the middle of the candlestick. This Doji indicates the tussle between the bulls and bears. They attempt to take control by taking the price up and down.

However, both forces fail to control and end up in the middle leaving confusion around the market. Candlesticks have long upper and lower wicks with a small real body in the middle of the candlestick. This Doji indicates the tussle between the bulls and bears who attempt to take control by taking the price up and down. But they both fail to control and end up in the middle leaving confusion around the market. This Doji has a long upper wick and small real body at the bottom of the candlestick with a very small or no lower wick at all.

The Gravestone Doji again signifies the struggle between buyers and sellers. The buyers take the price high up and the sellers manage to pull it back. Engulfing candlestick patterns are the reversal patterns that are made up of two candlesticks. What defines as being engulfed in these patterns is the size of the two candlestick bodies.

Instead the bodies of the two candlesticks are compared. A Bearish Engulfing Pattern appears after a bullish move and signals a bearish reversal. In this pattern, a green candlestick is followed by a red candlestick.

The body of the second red candle is larger than the first green candle. It completely engulfs the first candle body in a way that the open and the close of the green candle lies within the open-close range of the second candle. The pattern is important because it signals that the uptrend is slowing down and bears can take control of the market anytime.

A Bullish Engulfing Pattern is the opposite of the Bearish Engulfing Pattern. The difference is that it appears after a bearish move and signals a bullish trend reversal. In this pattern, a red candlestick is followed by a green candle that completely engulfs the body of the first red candle. Bullish Engulfing pattern is useful to identify the reversal in a bearish trend.

Dark cloud cover is a bearish reversal pattern that we anticipate to appear after an uptrend. The pattern is comprised of two candles. The first candle is a strong green candle. And the second candle is a red candle that opens above the closing of the previous candle. The closing of the second candle needs to be near to the low and well within the body of the preceding candle.

The wisdom is that the deeper the second candle closes into the body of the first candle the greater the chances of a bearish candlestick reversal occurring. Morning Star is a bullish reversal pattern and is made up of three candles. The first is a long red candle. In other words, the second candle opens lower than the previous close.

The third and the final candle is a green candle with a big enough real body that penetrates back up deep into the body of the first red candle. The middle candle looks like a star. As a result, the pattern gets its name from the morning star in the east that precedes the sunrise. Leading up to this pattern, the market is in a downtrend and the bears are in control. The first parameter to consider is the size of the candlestick.

The longer the body of one candlestick relative to the others, the greater the pressure on the market of buyers or sellers. The large white body indicates that the market is bullish, which means that the buyers were more active at the end of the period.

If the candle is dark, the sellers dominate at the close. If the candlestick bodies are short, it means that it's forming a pullback from the current trend or a flat is coming.

It happens when the bulls and the bears are almost equal in strength and the market is in indecision about the future direction of the quotes.

A long bullish candlestick, which appears after a long downtrend, may indicate that the sellers' forces are running out, and the trend can be reversed upwards. And when such a candlestick closes above the resistance level, it may indicate that the market fixes at a new price level.

However, we can't be completely sure about what happened when the candlestick was in the formation stage. The way from the opening level to the closing one can be quite straightforward, but there might have been some oscillations in the process.

To find out how the period was traversed, you need to switch to time frames lower in the terminal, when possible. The long shadow on one side of the candle usually shows the change in market sentiment during the formation of the candle. In traders' jargon, such candlesticks are called "pin bars".

They are formed at the extremes and are often a sign of a short-term trend change or the continuation of a long-term trend after the correction. Pin bars are often formed at a strong level, which was tested but not broken. In this case, a large shadow is directed towards the level. During the periods of maximum opposition between the bulls and bears, a Doji candle is drawn on the chart with a very long shadow.

These candlesticks show that the market is in indecision: trades are very active, but it doesn't give any significant result. To begin with, memorize a few forex candlestick patterns and find them on the chart. Try to use them when analyzing the current market situation - that way you will finally learn these patterns. Then memorize new forex candlesticks and keep practicing. There are different types of candlestick patterns and candles in Forex, which help traders to analyze the market situation and make predictions about the further movement of the price chart.

A Doji is a candlestick in which the open price is the same as the close price - it has no or almost no body a very small body. In general, Doji shows signs of indecision in the behavior of financial market participants, and therefore, as a rule, signals of an approaching reversal of the market trend. It should also be borne in mind that Doji is of particular importance only in those markets charts where they occur not too often. If a Doji occurs too often on any chart, it loses its significance.

Likewise, if there is a series of forex candlesticks with small bodies on the chart, the appearance of a Doji in their background will not be important. This is especially true for a Doji, which appeared after a long white candle in an uptrend. The Doji becomes especially important because it clearly shows that the bulls those who work for the rising trend are hesitant to go higher.

Sometimes, when a Doji appears on an important peak or an important base, it can serve as support or resistance, depending on the direction of the trend. Candlesticks with a small body size are called " spinning tops".

They usually appear during periods of market consolidation. The spinning tops tell us about the neutral character of the market and appear within a narrow trading corridor.

The main difference between a "spinning top" is the small size of the body. The size of shadows usually does not matter much. Very often, the "waves" play an important role in the construction of various graphical models.

Marubozu is a type of Japanese candlestick, which has no or very small upper and lower shadows. Moreover, the smaller the shadow, the stronger the signal. A white candlestick indicates that the open price coincides with the low and the close price - with the high for the analyzed period. It reflects a "bullish mood" in the market. If the candle is black, it indicates that the open price coincides with the high and the close price coincides with the low of the trading time frame. Its appearance indicates a greater prevalence of "bearish" sentiment in the market.

Using different types of Japanese candlesticks in our work, we get much more information from the charts to understand and analyze the market than if we use line or bar charts. The various combinations created by the candlesticks give us useful information about the market conditions and the direction of the trend.

Also, it should be noted that the theory about candlesticks is because the size and the relative position of the candle body and the shadows, as well as the relative position and color of neighboring candles, can signal the continuation of the movement, the slowdown or reversal of the trend.

Therefore, it is necessary to learn to read and understand the signals given by the various patterns of forex candlesticks. There are countless candlestick patterns that traders can use to identify areas of interest on a chart. They are used for day trades, trading on price swings, and even when opening long-term positions. While some patterns can indicate a balance between buyers and sellers, others show a reversal, continuation consolidation , or indecision by market participants.

It is important to note that candlestick patterns themselves are not necessarily a signal to buy or sell. Instead, they represent a way to take a deeper look at market structure and potential signs of upcoming opportunities, which is the reason why it is desirable to familiarize yourself with such patterns in their proper context.

It can be the context of the technical pattern on the chart, as well as the broader market environment and many other factors. In a nutshell, like any other market analysis tool, candlestick patterns are most useful when used in conjunction with other methods. This can be the Wyckoff Method, Elliott Wave Theory, and Dow Theory, which can also include technical analysis indicators such as trend lines, Moving Averages, Relative Strength Index RSI , Stochastic RSI, Bollinger Bands, Ichimoku Clouds, Parabolic SAR, or MACD.

These are important reversal signals at the top and the base of the trend. The distinctive feature of these patterns is that they have the same signs, and the color of the body does not matter. In essence, it is the same formation consisting of a single candle, and its name will depend on which trend it was formed. Hammer - it appears in a downtrend and signals the end of a bearish trend. In Japanese such a candle is also called Takuri, which roughly means "to measure the bottom, groping for it with your foot.

Since these patterns are reversal patterns, it is important to look for them only on pronounced trends. Signals on a sideways trend will be false in most cases.

Types of Candlestick in Forex discover trading patterns that aid technical analysts in setting up transactions. These candlestick patterns forecast the direction of price movements in the future. Candlestick designs creates by arranging two or more candles in a certain pattern.

However a single candlestick may sometimes send forth tremendous indications. The hanging man candle is a candlestick shape that indicates a significant rise in selling pressure during an upswing. A long lower wick, a short upper wick, a tiny body, and a close below the open describe it. Recognizing the hanging man candle and other candle forms is an excellent method.

Its to pick up on some of the most common entry and exit indications when utilizing candlestick charts. A bearish indication indicates by the hanging man candle circled below. Bearish indications like these used by traders to enter short trades.

Which are bets on the GBP depreciating against the USD. If a trader utilizes the hanging man to execute a short trade. He or she should use a positive risk-reward ratio to put a stop loss and a take profit. Basically a shooting star candle, like the hangman. It is a bearish reversal candle with a wick that is at least half the length of the candle.

The lengthy wick indicates that the vendors outnumber the customers. A shooting star is an example of a quick entry into or exit from the market. Traders can profit from the shooting star candle by entering a short trade after it has closed.

Traders might then set a stop loss above the shooting star candle and aim for a previous support level or a price with a favourable risk-reward ratio. Successful traders demonstrates to have a favourable risk-reward ratio. For instance the opposite of the shooting stars is the hammer candle formation. It distinguish by a long wick and a short body. Traders would employ a hammer to make a long entry into the market or a quick departure.

How a forex trader might enter a long trade using the hammer candle formation, with a stop-loss. Below the hammer candle and a take profit high enough to provide a good risk-reward ratio. Basically piercing pattern is a multi-candlestick chart pattern. That appears after a downward trend and indicates a bullish turnaround.

It is made up of two candles, the first of which is a bearish candle. Indicating that the downturn will continue. The second candle is a bullish candle. Indicating that the bulls have returned to the market and a bullish reversal is imminent. If a bullish candle forms the next day, traders can open a long position with a stop-loss at the low of the second candle. Bullish Engulfing is a multiple candlestick chart pattern that indicates a bullish reversal following a decline.

It is made up of two candles, with the second candlestick swallowing the first. The first candle is a bearish candle, indicating that the slump will continue. The second candlestick is a lengthy bullish candle that totally engulfs the first. And signals the return of the bulls to the market. If a bullish candle forms the next day. The traders can open a long position with a stop-loss at the low of the second candle.

After a downturn, the Three White Soldiers is a multiple candlestick pattern that indicates a bullish turnaround. Three lengthy bullish bodies with no long shadows and open within the true body. Which is of the previous candle in the pattern make up these candlestick charts. After a downturn, the White Marubozu is a single candlestick pattern that indicates a bullish turnaround. This candlestick has a lengthy bullish body with no upper or lower shadows. Its indicating that the bulls are applying purchasing pressure and that the markets are likely to turn bullish.

When this candle forms, sellers should exercise caution and close their short positions. Up: After a downturn, the Three inside Up is a numerous candlestick pattern that indicates a bullish reversal.

It consists of three candlesticks. The first is a long bearish candle,. Also the second is a little bullish candle that should be in the same range as the first candlestick. And also the third candlestick is a small bullish candle that should be in the same range as the first candlestick. A lengthy bullish candlestick is the third candlestick to confirm the bullish reversal. The first and second candlesticks should have a bullish harami candlestick pattern connection.

After this candlestick pattern complete, traders can initiate a long position. After a downturn, the Bullish Harami is a numerous candlestick chart pattern that indicates a bullish turnaround. It is of two candlestick charts, the first of which is a tall bearish candle and the second of which is a little bullish candle that should be in the same range as the first.

The first bearish candle indicates that the negative trend is continuing. While the second bearish candle indicates that the bulls have returned to the market. After this candlestick pattern is complete, traders can initiate a long position. The Tweezer Bottom candlestick pattern is a bullish reversal pattern that appears at the bottom of a downtrend.

It is of two candlesticks, the first of which is bearish and the second of which is bullish. Both candlesticks produce very identical lows. The preceding trend is a decline when the Tweezer Bottom candlestick pattern establish.

A bearish tweezer candlestick appears, indicating that the current decline will continue. The bottom-most candles with almost identical lows show the strength of the support and also imply that the downtrend may be reversing to build an uptrend. As a result, the bulls take action and push the price upward. The next day, when the bullish candle produce, this bullish reversal is verified. At the end of a downturn, an Inverted Hammer forms, signalling a bullish reversal.

The true body is at the end of this candlestick, and there is a lengthy higher shadow. The Hammer Candlestick pattern is the inverse of this pattern. When the starting and closing prices are close to each other. This pattern generate, and the top shadow should be more than double the genuine body.

After a downturn, the Three Outside Up is a multiple candlestick pattern that indicates a bullish reversal. It is of three candlesticks, the first of which is a small bearish candle and the second of which is a massive bullish candle that should cover the first. The first and second candlestick charts should have a Bullish Engulfing candlestick pattern connection. Because the two closing prices are the same or nearly the same across the two candles, producing a horizontal neckline, the pattern is termed a neckline.

This is a two-bar candlestick pattern that develops when the market is in a decline. To consider a bullish counterattack pattern, a pattern must match the following criteria. For the bullish counterattack pattern to occur, the market must be in a significant decline. The first candle must have a true body and be a long black candle. The second candle must be a long white candle with a true body preferably, it should be the same size as the first candle.

The second candle must burn out about the same time as the first. This is a bearish candlestick pattern. Bearish Reversal candlestick patterns signal that the current uptrend is about to turn down.

When bearish reversal candlestick patterns appear, traders should be wary about their long bets. The Following are the Several Bearish Reversal Candlestick Chart Patterns:. The Hanging Man candlestick pattern is a single candlestick pattern that appears at the conclusion of an upswing and indicates a bearish reversal.

The upper shadow on this candlestick pattern is either absent or minimal. The psychology behind this candle formation is that prices opened and sellers pushed prices down. Buyers rushed into the market, hoping to drive prices higher, but they were unsuccessful, as prices closed below the starting price.

This resulted in the creation of a bearish pattern, indicating that sellers have returned to the market and the upswing may be coming to an end. If a bearish candle forms the next day, traders can start a short position with a stop-loss near the high of Hanging Man. After an ascent, a numerous candlestick pattern called Dark Cloud Cover appears, signalling a bearish reversal.

It is of two candles, the first of which is a bullish candle, indicating that the uptrend will continue. If a bearish candle forms the next day, traders can start a short position with a stop-loss at the peak of the second candle. A bearish reversal indicate by numerous candlestick pattern that appears after an upswing.

It is of two candles, with the second candlestick swallowing the first. The first candle, which is a bullish candle, implies that the upswing will continue. The second candlestick chart displays a lengthy bearish candle that totally engulfs the previous one, indicating that the bears have returned to the market.

Candlesticks can form so-called candlestick patterns, which are specific patterns used to identify potential trend reversals or continuations. Its to pick up on some of the most common entry and exit indications when utilizing candlestick charts. Bullish Engulfing, as the name explains the green candlestick engulfs the red candlestick. A long bullish candlestick, which appears after a long downtrend, may indicate that the sellers' forces are running out, and the trend can be reversed upwards. A bullish candlestick appears, indicating that the current upswing will continue. Understanding candlestick charts in Forex can make a real difference to your trading performance.

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