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Posted on Apr 22, 2022 at 05:40 PM
Last time, we explored the fascinating world of Japanese Candlesticks—what they are, their importance, and how to read them to determine when to take the big decision of BUYING or SELLING.
In the first series of this article, we covered the structure, history and all-around awesomeness of Japanese Candlesticks Click here to see it.
Here's a quick recap of what you'll learn in the first series:
Go ahead and Click Here Now to read the full article!
In this article, you'll learn the most important Japanese Candlestick Patterns in the world of Forex Trading, commit them to heart, and trust me, you'll be well on your way to properly understanding the concept of Price Action!
Ready? Read on and let's set the ball rolling—together.
An army of Forex Candlestick Patterns exists and I'm going to be focusing on only the most important ones that move the needle—those candlesticks that indicate the various points that price is likely to make an important turn.
These candlesticks are categorised and regarded as Reversal Candlestick Patterns.
Reversal Candlesticks are pretty important because they help in identifying those likely reversals that will grant you entry points for opening trades that are very likely to give you a profitable reward-to-risk ratio. Cool right?
That's not all—these candlestick patterns can also be used as continuation signals when they fail to produce a reversal too!
Now that you're fired up and ready, it's time to begin learning some important Forex Candlestick Patterns:
This Candlestick Pattern got its name from its appearance and possesses both BULLISH and BEARISH versions.
The BULLISH version looks like a hammer and is called the 'HAMMER'or 'pin bar', while the BEARISH version is regarded as a 'SHOOTING STAR'.
At the bottom of the 'hammer' is a long wick that opens and closes at virtually the same level.
If you read my first article here, then this 'guy' should be very familiar already.
It's the most common candlestick in the Forex trading world and is popularly described as an Indecisive Candlestick because it is neither 'here' nor 'there'.
A Doji Candlestick is always in between and fails to break in either a BUY or SELL direction.
As the name implies, the BULLISH or BEARISH ENGULFING is a candlestick that completely 'absorbs' (or engulfs) the previous one just before it—just like an amoeba.
Engulfing Candlesticks are also regarded as "outside candlesticks", and they often indicate a move in the direction of an upcoming candlestick, as momentum builds.
Sounds non-English, right?
'Marubozu' is actually a Japanese word meaning 'bald man', and is used to refer to a candlestick that has no 'hair' (wick) at its closing price.
Although a Marubozu can have a wick in the other direction, it needs to close at the very high or very low of the candle.
Depending on the direction of the wick, a Marubozu can be full, open and close. More details are in the picture below.
The importance of candlesticks cannot be overemphasized. With it, you can rapidly determine where the Forex market either wants to go—or sometimes—where it does not want to go.
It is also important to note that candlesticks are not perfect, rather, they try to keep you informed of the inclination of price towards its next movement, which can be fully learned through constant practice.
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