The candlestick charts assist in respect of the entry and exit points in the market. The trader can potentially decrease the risk exposure by using the candlestick technical analysis as well as be in the right time at the right place.
The candlestick charts are also called Japanese candlestick charts. Candlestick charts can be used at all time frames and for all trading styles - including day trading and swing trading as well as long-term position trading.
Before explaining the candlestick patterns, it is necessary to define how every candle looks like, and what price information do they tell us. You can see the bullish and the bearish candlestick well explained in the picture below. Note that the green candles stand for a bullish period, while the red candles stand for a bearish period. You can also change the color of the candlesticks in your trading platform.
The candlestick patterns are broadly divided into two portions, i.e. bullish patterns and bearish patterns. The candlestick patterns give the indication of trend reversal or continuation of a long-term trend, and the candlestick patterns are created with the help of one or more candles.
Following are the most common candlestick patterns used by forex traders for analyzing the market conditions;
Engulfing Candlestick Pattern
Hammer Candlestick Pattern
The hammer usually occurs during the downtrend when the price of the asset is falling, signaling a possible end of the bearish move. The hammer candlestick pattern appears when the price of the asset fall from its opening price during the trading session and the closing price ends nearby the opening price after recovery. Here it does not matter that much whether the body of the Hammer is bullish or bearish. Practically, the hammer pattern can also be considered to be the bullish Pin Bar pattern.
Harami Candlestick Pattern
Usually, the harami candlestick pattern can also be considered to be the inside bar pattern.
Piercing Candlestick Pattern
The piercing pattern signals the reversal of the bearish trend as the asset price downtrends and starts moving toward upward.
The bearish piercing candlestick patterns look exactly opposite.
Doji Candlestick Pattern
Shooting Star Candlestick Pattern
Below you can also take a look at the summary of already mentioned candlestick patterns, as well as some more candlestick patterns that can be effectively used in forex trading.
And one more summary of the candlestick patterns that you can use in your forex trading below:
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