Currency Forex Market Trading
It is being called as Japanese's candlestick. This is one of the effective technical tool used by the traders to nick profit out of FX market. A good candlestick reader can initiate 90% winning trade during the session. It gives almost a platform to think and project the future trend of the market. There are several patterns and candle shapes to be studied in order to read a candlestick graph. Hope you will find it interesting. Lets go for some of the important patterns or basics of this technical indicator.
Major Candle stick pattern
This formation indicates that bulls are having a conflict with bears and both open and close price will be same in this candlestick. It is to be assumed that Market is confused if doji is emerging.
Bullish Engulfing pattern
This formation indicates that bulls have overpowered bears and market is expected to rise from these levels. This formation describes the trend reversal is going to take place after a bearish pattern
Bearish Engulfing Pattern
This formation of candlestick indicates that bears have overpowered bulls and can see a downside rally. This pattern warns about the trend reversal. Traders who have longed will start squaring after the formation of Bearish Engulfing pattern.
Hammer and Hanging Man.
The tail of a candle must be at least 2 times the total length of the body, and then only you can call it as Hammer. If this hammer forms at the end of downside rally, then it is the sign for trend reversal and bulls will start wearing the dress. Hanging man is just similar to the Hammer by shape but the body color and interpretation will be just opposite. This appears mostly at the top of up trend signally a bearish pattern.
Piercing Pattern
This is a two-candle pattern, the first one is black and second one will be white. The white candle opens below the trading range of black one and closes above 50% of the black candle?s trading range. This indicates that after a strong down trend, still the atmosphere is bearish but the bulls are able to step in higher at the end of the day. One can go short during this kind of up tick, as the trend is still bearish.
Dark Cloud
This is also a two-candle pattern. Market is still bullish but at the end of the day bears are able to step in and closes near to the day?s low. This is just opposite to Piercing Pattern.
Bullish Harami
This two-candle pattern has 1st candle having the same color of the trend and long black body. Second candle?s body is white and its size will be small and is covered under the first candle?s trading range. After a strong bearish pattern this formation of harami signals the trend reversal is due. So traders after the formation of this kind of pattern will start squaring their short positions.
Bearish Harami
This two-candle stick pattern appears at the top of bullish trend, and after the formation of this pattern market will start covering their long position and thus trend reversal can take place.
Morning Star
This is a three-candle stick pattern. After the close of first black candle ensuring the bearishness, a small white candle with short body and short tale formation and subsequent long white body candle which covers more than 50% of initial black candle body signals the reversal of down trend. Bears will start vanishing after the formtion of this three-candle stick pattern.
Evening Star
This is a three-candle stick pattern. After the two white candle body, initial one with long white real body and second one opening above the first with short body and tail continued with black real body candle formed well below the second candle. This black candle will have long real black body with short tail either end.
Kicker Signals
Bearish & Bullish
This is also a two-candle stick pattern. Both candle?s opening prices are same but movements are just opposite. This signifies a clear cur investor?s sentiment and market is about to reverse the trend.
Shooting Star
This is a one-candle stick pattern appear at the top of an up trend. This candle has long tail having a length of more than two fold of the body. This candle indicates that bulls are still holding but bears are about to step in. So it?s a signal for pullback of price from its upside rally.
Inverted Hammer
This one-candle stick pattern indicates that reversal of the trend is going to take place. After the lengthy bearish atmosphere market is expected to open higher.
Conclusion:-
Candlestick alone will not help you in projecting the market every time. It has to be correlated with other technical tools like SMA, RSI, Support and Resistance. It will be more useful when suitable mixes of technical tools are being used for analysis. This will help a trader in minimizing his loss and maximizing his profits.
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