Candlestick Patterns in Forex
Candlestick patterns are formulated by the Japanese and are widely used in forex. Successful forex traders should know how to identify patterns in candlestick charts. Based on the pattern in the candlestick chart, they can make a decision to buy or sell currency pairs on the forex market.
There are many types of candlestick patterns that you can know, but there are some important ones like the following
SPINNING PATTERN TOPS CANDLESTICK
This is a candlestick that has upper and lower shadows (both are equally long) and small. The color is not too significant. This pattern shows the possibility of confusion between buyers and sellers.
The small size indicates that there is a slight movement from the opening points to the closing points and a long shadow shows that in the transaction between this buyer and seller no one gets the above hand.
MARUBOZU CANDLESTICK PATTERN
This is a candlestick whose body has no shadow. The highest and lowest points are the same as the opening points and closing points. There are two types of Marubozu candlestick patterns namely White Marubozu and Black Marubozu.
Marubozu Putih contains a long white body without a shadow. In this pattern, the opening price is the same as the lowest price and the closing price equals the highest price. This pattern shows bullishness.
Whereas Black Maburozu contained a long black body without shadow. Here, the opening price is the same as the highest price and the closing price is the same as the lowest price. This pattern shows bearishness.
CANDLESTICK ENGULFING CANDLESTICK PATTERN
The bullish Engulfing pattern includes a large white body that engulfs a real black body that is in a downward trend. Conversely, a bearish engulfing pattern is seen in the chart when bearish follows bullish ie a long black body engulfing a small white body in an uptrend.
THREE WHITE ARMY CANDLESTICK PATTERNS
When there is a long bullish candlestick following the downward trend, it is said that there are three white soldiers formed. This pattern shows that a reversal has occurred.
The first candle is called a reversal candle which both concludes a downward trend or indicates that a consolidation period followed by a downward trend has been completed.
The second candle that follows must be larger than the first candle. The second candle must also be close to the highest point, with a very small axis or none at all.
The third candle must be the same size as the second candle and have a small shadow or no shadow at all.
THREE BLACK CROW CANDLESTICK PATTERN
In the three black crow pattern, three bearish candles follow an uptrend which indicates that a reversal is on the card. The second candle must be larger than the first candle. He must be near the lowest point or at the lowest point itself. The third candle must be larger than the second candle, or the same size. This candle must have a very small shadow or no shadow at all.
To conclude the discussion of the candlestick pattern, knowledge of identifying the candles mentioned above is an asset for every trader. You must understand or at least try to recognize it. This will make your trading better in the future. You can learn about various types of candlestick patterns from the internet, other more experienced traders, tutors in forex schools and also from literature such as forex books. Never be ashamed to start learning again ..