Two candles later you spot a nice three inside down candlestick pattern, which is considered as a very potent bearish signal. Because of your high level of patience and your knowledge of candlestick formations, you have greatly increased the odds in your favor. The pair almost immediately goes in your favor and nets you hundreds of pips. I could get a lot more signals with just candlesticks and make more money!

By simply pairing candlestick formations WITH support and resistance levels, you have increased your odds your winning.

The 8 Candlestick Trading Strategies

If you go to work on your goals, your goals will go to work on you. If you go to work on your plan, your plan will go to work on you. Whatever good things we build end up building us. In comparison with continuation candle patterns, the reversal candle pattern indicators represent the majority of the candle patterns you will meet on the Japanese candlestick charts.

Forex candle formations

So, you should not be surprised that the best 5 candlestick patterns for day trading are reversal patterns. The Doji candle family consists of single candle formations where the price action opens and closes at the same price. Every Doji candlestick symbolizes the equalization of the bearish and the bullish forces. This means that the current price trend is becoming exhausted and it is likely to be reversed. The Doji Forex pattern could appear after bullish moves as well as after bearish moves.

Despite that, the function of the pattern — to reverse the price action — stays the same. As the Doji candle closes at the same level as it opened, the candle looks like a dash. Yes, but this is not the only Doji candle pattern known in Forex trading. There are other Doji candlesticks too. Below you will find the most popular Doji candlestick pattern types.

The confirmation of all of the Doji patterns comes when with the finish of a candle that closes in the direction that is opposite to the trend. This candle is the first indication that the reversal is beginning. The Tweezer Tops is a double candlestick pattern Forex indicator with reversal functions. The pattern comes at the end of bullish trends and signals the beginning of a fresh bearish move. The first candle of the Tweezer Top candlestick formation is usually the last of the previous bullish trend.

The second candle of the Tweezer Top pattern should have an upper shadow that starts from the top of the previous shadow. At the same time, the upper shadows of the two candles should be approximately the same size. The Tweezer Tops has its opposite equivalent, called Tweezer Bottoms. The Tweezer Bottoms Forex pattern has a completely opposite structure. The pattern comes after price drops and signals upcoming bullish moves.

The first candle of the Tweezer Bottom is usually the last candle of the previous bullish trend. The second candle of the Tweezer Bottom pattern should have a lower shadow that starts from the bottom of the previous shadow. At the same time, the lower shadows of the two candles should be approximately the same size.

The confirmation of the Tweezer Candlesticks comes with the candle that manages to close beyond the opposite side of the pattern. This candle is a strong indication that the trend is reversing. The Hammer candlestick pattern is a single candle pattern that has three variations depending on the trend they take part in. Every Forex candlestick that belongs to the Hammer family has a small body and a big upper or smaller shadow. At the same time, the other shadow is either missing or very small. If you are wondering if the name of the Hammer candle family comes from the structure of the candles, you are correct.

Forex Trading with Volume and Candlestick Charts | New Trader U

The candles in the Hammer family are four, and they all have reversal character. I have shown the bullish and the bearish version of each candle. The meaning is the same. The first candle on the sketch is the Hammer candlestick chart pattern. The candle emerges during bearish trends and signalizes that a bullish move is probably on its way. The Hammer candle has a small body, a long lower shadow and a very small or no upper shadow.

Traders use the Hammer candlestick to open long trades. The Inverted Hammer candle has absolutely the same functions as the Hammer candle, but it is upside down. The Inverted Hammer has a small body, a big upper shadow, and a small or no lower shadow. Same as the Hammer candle, the Inverted Hammer candlestick comes after bearish moves and signalizes that a fresh bullish move might be emerging.

Traders use the Inverted Hammer pattern to open long trades. The Hanging Man candlestick is absolutely the same as the Hammer candlestick pattern. It has a small body, a long lower shadow and a very small or no upper shadow.

Candlestick Patterns You Should Know

However, the Hanging Man Forex pattern occurs after bullish trends and signalizes that the trend is reversing. As a result, the Hanging Man candle pattern is used by traders to open short trades. The Shooting Star candle pattern has the same structure as the Inverted Hammer candle. It has a small body, a long upper shadow and a tiny or no lower shadow. However, the Shooting Star Forex candle comes after bullish trends and signalizes that the bulls are exhausted. As a result, a reversal and a fresh price decrease usually appear afterward.

Therefore, Shooting Star candlestick chart patterns act as a signal to short Forex pairs. The confirmation of the Hammer, Inverted Hammer, the Shooting Star and the Hanging Man comes with the candle which closes in the direction opposite to the trend.

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This candle is likely to be the first of an eventual emerging trend. The Three Inside Up is another reversal candle pattern indicator that comes after bearish trends and foretells fresh bullish moves. It is a triple Forex candlestick pattern that starts with a bearish candle. The pattern continues with a bullish candle, which is fully engulfed by the fist candle, and which closes somewhere in the middle of the first candle.

The pattern ends with a third candle, which is bullish and breaks the top of the first candle. The first candle of the Three Inside Up candle pattern is usually the last candle of the previous bearish trend.

Forex Candlestick Patterns Guide

It comes after bullish trends and usually begins fresh bearish moves. The Three Inside Down candlestick pattern starts with a bullish candle, which is usually the last of the previous bullish trend. The pattern continues with a second candle — a bearish one that is fully engulfed by the first candle and closes somewhere in the middle of the first candle. The pattern then continues with a third candle, which is bearish and goes below the beginning of the first candle.

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The confirmation of the Three Inside Up and the Three Inside Down candlestick patterns comes with the third candle that closes beyond the beginning of the first candle of the pattern. The Morning Star candle pattern is another three-bar formation that has reversal functions.