What is Three White Soldiers?
Three White Soldiers is a bullish reversal candlestick pattern, it changes a downtrend into an uptrend.
How does Three White Soldiers pattern look like?
This Forex candlestick patterns consists of three green (or blue) candlesticks. They occur during a downtrend.
How can I trade with Three White Soldiers?
Three White Soldiers occur during a downtrend and reverses the market into an uptrend. So you are expected to be buying or looking ofr buying opportunities.
However, always have more than one factor to confirm your trading bias, such as Fibonacci retracements, indicators, etc.
What is the Hanging Man Candlestick?
Hanging Man is a candlestick that forms at the end of a price rally upwards. It turns the price’s orientation from an uptrend to a downtrend, thus it is considered as a bearish signal (we should be looking for selling opportunities).
And since the Hanging Man Candlestick changes the orientation of the price action, it is considered to be a “reversal candlestick pattern”
How does a Hanging Man Candlestick look like?
Hanging Man Candlesticks usually have a mid-sized body and a relatively long lower wick (Also known as shadow or tail).
They usually have very short upper wick, or no upper wick at all.
Where does a Hanging Man Candlestick appear?
Hanging Man Candlesticks usually appear at the end of a price rally upwards (price heading up) and turns that rally into a downwards rally.
What do I do when I see a Hanging Man Candlestick?
Hanging Man Candlesticks are seen by traders as a strong bearish signal, that means when you see this candlestick formation you have to look for a selling opportunity.
However, you have to keep in mind other factors, such as the orientation of the trend, other forex indicators, Fibonacci retracements and all other Forex trading signals.
What is Harami Cross?
Harami Cross is a Forex candlestick reversal pattern (it changes the direction of the trend).
This candlestick formation consists of two candlesticks, one is relatively long and the next is very very short that it looks like a cross (almost has a horizontal line as a body).
How does Hammer Cross formation look like?
It has a typical formation of a long candlestick followed by a shorter candlestick that hardly has a body, the following small candlestick has to be entirely included within the body of the previous candlestick body.
Hammer Cross can be either bullish or bearish.
How can I trade with Harami Cross candlestick pattern?
Hammer Cross is a reversal candlestick pattern, it means that whenever it occurs, we should be expecting a reverse in the direction of the market.
So if it occurs during an uptrend, it changes it to a downtrend.
If it occurs during a downtrend, it changes it to an uptrend.
During an uptrend:
When Harami Cross pattern occurs during an uptrend, we should expect it to reverse and start downtrending. This means we should be looking for selling opportunties.
During a downtrend:
When Harami Cross forms during a downtrend, we should expect the market to reverse and we start seeing an uptrend. This should be a strong buying signal for us.
In all cases, be sure to wait for a confirmation candlestick in the same direction of your potential trade. And always keep in mind other technical analysis methods.
What is Harami?
Harami is a reversal Forex candlestick pattern. It indicates an upcoming downtrend or that a rally is losing strength.
How does Harami Candlestick Formation look like?
Harami formation consists of two candlesticks, the first has a relatively long body followed by the second candlestick which has a smaller body entirely ranging within the body of the first (longer) candlestick.
What does Harami formation tell us?
Whenever we encounter Harami formation, it means that the price is going to fall down.
If Harami appears while the price is rallying, it means that the rally is losing strength and the price action is likely to change.
The smaller the wick (shadow) of the second candlestick, the more accurate Harami formation is.
The smaller the second candlestick is, the stronger the bearish signal.
If the second candlestick is more at the top of the first candlestick during an uptrend, this means the price might keep up its bearish bias, instead of reversing into an uptrend.
If the second candlestick is more at the bottom of the first candlestick during a downtrend, this means the price might keep its bearish bias, instead of reversing.
What should I do when I see Harami Candlestick formation?
- Harami is a reversal candlestick pattern, which means price is expected to change its direction after the pattern is formed.
- In an uptrend, you expect price to fall, so you should be looking for selling opportunities.
- In a downtrend, you expect price to rise, so you should be looking for buying opportunities.
In all cases be careful not to depend too much on Harami candlestick pattern, nor any other candlestick patterns out there. You need to keep in mind other factors such as your Forex indicators, Fibonacci etc.
What is the Inverted Hammer candlestick?
Inverted Hammer is a reversal bullish candlestick (means it appears at the end of the down market (downtrend) and changes its direction into an uptrend).
How does the Inverted Hammer look like?
Inverted Hammer has a long upper wick (upper shadow or upper tail), an average-sized body and a very short lower wick, or no lower wick at all.
Inverted Hammers can be either of red or blue color.
Where do Inverted Hammer Candlesticks appear?
Inverted Hammer candlesticks appear at the end of a downtrend and turn it into an uppertrend. Therefore, they are reversal candlesticks.
What should you do when you see an Inverted Hammer?
Inverted Hammer is a bullish candlestick, means that you should expect the market to go up when you see it ending a downtrend.
However, you can’t get yourself in a trade just because of the Inverted Hammer though it is really a strong candlestick pattern. You still need to have more than one sign, such as a moving average, indicator, Fibonacci retracement etc.
Needless to say, wait for the candle to close before judging what kind of candlestick it is.
What is the Hammer Candlestick Pattern?
Hammer is a Forex bullish candlestick that forms at the end of a downtrend and turns it into an uptrend. (bullish = buying/or going up. And because it changes the direction of the trend, therefore it is called a “reversal” candlestick).
How does Hammer Candlestick look like?
Hammer candlesticks usually have very long lower wick (AKA shadow or tail) and a very short upper wick (or no upper wick at all.)
The color of the Hammer candlestick is not really important, it can be red or blue.
Where does Hammer Candlestick appear?
It appears at the end of a downtrend (market heading down) and changes it to an upper trend.
What should I do when I see a Hammer Candlestick Pattern?
Most traders consider Hammer Candlesticks a big buying signal, they are apparently right, but the more experienced traders would advise you to look for more signals before entering your trade.
You can’t depend on one signal, you have to trade in in the direction of the trend, not against it. Plus wait for other signals to buy, Fibonacci retracement, moving average, hitting a support level etc.
And of course, never judge the candle during its formation, wait patiently till the candle closes and you will then know for sure what kind of candlestick it is and what it means to your trading experience.
What is a Doji Candlestick Pattern?
Doji Candlestick formation is one of the most important and meaningful Forex candlestick patterns. It shows the lack of determination of price action. Though it shows relatively big volatility in its long wicks.
How does a Doji Candlestick look like?
Doji Candlesticks have a small body and relatively long upper and lower wicks.
A perfect Doji Candlestick usually has a body of a flat horizontal line, so it looks like a cross or a plus sign.
Where does a Doji Candlestick appear?
Doji Candlestick appears when the market is not sure whether it should form a bullish or a bearish candlestick. This means that traders are divided into selling and buying, thus the candlestick is very hesitant to take a clear bullish or bearish bias.
What should I do when I see a Doji Candlestick?
- If the market is in a rally (going up), the Doji Candlestick is a sign that this rally is losing its strength, and the price might be falling, so it should be a bearish signal. (You should be looking for a selling opportunity).
- If the market is going down, the Doji Candlestick is a sign that the market could rise again, so it should be a bullish signal. (You should be looking for a buying opportunity).
- In a range-bound market, the Doji Candlestick usually has a neutral meaning, you should be waiting for the next candlestick formation to determine your position on the currency pair, or at least be sure you have other factors on your chart to support your trading bias.
More tips on Doji Candlestick formation:
- If the Doji Candlestick appears after a big bullish candlestick in an uptrend, that should be a strong signal of a reverse to a downtrend.
- If the Doji candlestick appears after a big bearish candlestick in a downtrend, that should be a strong signal of a reverse to an uptrend.
- A Double Doji Candlestick (two Doji Candlesticks right beside one another) is a strong signal of trend reverse.
- If you have lots of Doji Candlesticks on the specific chart, this means they are less effective. You should not depend on them in your trading decision, or at least wait for more signals to appear before having a trading bias.
What is a Bullish Engulfing Pattern?
Bullish Engulfing Pattern is a Forex candlestick pattern consisting of two candlesticks. It is a reversal pattern (it changes the direction of the trend), it usually turns a downtrend into an uptrend or a weaker downtrend.
How does Bullish Engulfing Pattern look like?
This candlestick pattern contains two candlesticks, one bearish and the other is bullish. The first one has to be smaller the the second.
The longer the second candle is (the bullish one), the strongest is the signal it gives.
Where does a Bullish Engulfing Pattern appear?
It appears at the end of a downtrend. It either changes it to an uptrend or just decreases the price’s bearish bias.
What do I do when I see a Bullish Engulfing Pattern?
Bullish Engulfing Pattern is a bullish signal. It means that we expect the price to rise after it appears. So when you encounter a Bullish Engulfing Pattern, you should be looking for buying opportunities.
However, you have to be patient and wait for the formation of the second bullish candle to complete before taking action, since it might surprise you and change its shape and thus change its trading indication.
IF the two candlesticks are almost the same size, that could mean the market will start range trading, so you can’t depend on this pattern in your Forex trading decisions.
Best is to wait till both candlestick formations complete and even for one more candle after them that shows us more bullish sign. Plus, you have to use other Forex trading factors, Fibonacci, indicators, etc.
Charts are a very important tool, they are like the crystal ball of today’s business. We finally get to see data, not just read numbers and see if they sound good or bad, now we have a picture to keep in mind and to help us better comprehend and digest our data.
However, a Forex chart has gone through so many changes, but one thing is guaranteed, it gets only better and better. Let’s see before introducing the candlestick charts and the various candlestick patterns, some of the other types of a Forex chart.
Forex Line Charts
A line chart is simply produced by connecting the closing prices of trading days (or hours or minutes, depending on the time frame you choose). It gives us a good idea of where the market has been going… up or down. But it doesn’t show us much more information other than that. Here is a Forex line chart sample, it represents the USD/JPY pair for about 3 months. Notice that you can easily see that the market is going down.
Forex Bar Charts
Just like line charts, bar charts show us the direction of the market. But more than that, they also show us the closing price of each session and how much money was involved in that specific session. Here is a bar chart sample, it represents the same line chart we saw just right above this, but this one in bars instead of a line.
Forex Candlestick Charts
Just like the two previous types of Forex charts, candlestick charts show us the direction of the trend (the market) and the closing price of each session. But candlestick charts show us much more information than just that.
They show us the open, high, low and close prices, using shapes called candlesticks which can help us better read the chart and even to predict what is most likely to happen in the future.
Here is a candlestick chart that represents the same market and time frame that the previous two charts did.
Because the candlestick charts provide more information than the other two types of charts, more and more (more means tens of millions) of traders prefer using them. And as you know, human mind always complicates things, people have found hundreds of ways to analyze the market using candlestick charts.
Some of these ways are Candlestick Patterns. Traders have noticed that when the candlesticks form a certain shape, market tends to act in a certain way, these shapes have long been known as candlestick patterns.
Now that we know how candlestick charts look and what they are used for, let’s take a look at the candlesticks themselves and see how they form and what that formation means.
A candlestick shape simply illustrates the space between the opening price and the closing price. Think of it as a railroad which is the distance or space between two train stations that the train moves on. Same here with a candlestick.
A candlestick is either red or blue/green.
A blue candlestick starts at a certain point then moves up till it reaches another point where it closes. So in this kind of candlesticks, the closing price is HIGHER than the open price.
Notice that in this candlestick you should be buying, hence it is sometimes called a bullish candlestick, the reason is that the price is going UP.
A red candlestick starts at a certain point then moves down, so the closing price is LOWER than the open price.
This candlestick is known as a bearish candlestick. The reason is that the price is going DOWN.
In both red and blue candlesticks, we notice that they often have a thinner line going above and below the candlestick bodies. These lines are called “wicks” or “shadow” and sometimes “tails”.
These shadows represent the track that price took while moving up and down, regardless of what the open and closing price are.