Forex Candlestick Patterns Trading Course
If you are just getting into the world of Forex trading, something that you absolutely need to be familiar with is candlesticks, otherwise known as candlestick graphs, as well as candlestick patterns. Candlestick graphs were actually invented well over 100 years ago in Japan.
What is interesting to note is that a Japanese man by the name of Homma figured out that yes, there was a link between supply and demand, but that prices could also be effected by the emotions of traders.
The point here is that in order to trader Forex properly, the candlestick graphs, and the patterns, are a vital analytical tool that you need to be able to read. Various candlestick patterns help to illustrate the size of price movements, which may be influenced by emotion. All of that said, today we are here to provide you with a bit of an explanation as to what exactly candlestick graphs are and do, what different candlestick patterns mean, and more!
Purpose of Candlestick Patterns
Alright, so in layman’s terms, the whole purpose of candlestick patterns and the graphs they can be seen on, is to provide you with a detailed overlook of price movements, which could be in stocks, securities, and currencies too.
Now, what is important to note here is that the main point and purpose of being able to read candlestick patterns is to predict short term price movements.
It’s all about being able to predict the short term direction of a price. If you can use these candlestick graphs to make accurate assessments of short term price movements, such as in Forex, you can therefore use these patterns to make accurate and profitable short term trades.
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Components of Candlestick Charts
When it comes to being able to analyze candlestick patterns, you first need to be able to tell what the different components of the graphs are, and what they mean as well. What you need to know here is that each candlestick graph displays the market’s open, high, low, and closing price for any given day. If you take a look, you will see that the candlestick has a very wide part, which is referred to as the “real body”.
Now, the real body represents the price variation or price range between the open and close of the day’s trading, which could be a Forex currency. Keep in mind that if the body of the candle is filled in, usually black, it means that the closing price for the day was lower than the opening price.
If the candle is white or not filled in, it means the opening price was lower than the closing price for that day. If you are using a common trading platform, down candles are often colored red and up candles colored green. Knowing all of what we just said here is very important if you want to be able to read candlestick patterns.
Bearish Candlestick Patterns
Let’s go over some of the most basic bearish candlestick patterns that you will come across when analyzing this type of graph.
This is a candlestick pattern with a long wick below the candle’s body and little to no wick above the candle’s body. The length of the body is usually about 1/3 the length of the lower wick.
This is actually an inversion of the hanging man pattern. It has a very small body with a long wick above the body, with little to no wick above the body. This is something that is usually observed in an uptrend, and it signals trend exhaustion.
This is a partly bearish pattern. Open, close, and low prices are all the same here. This implies that buyers and sellers were in a fight, and by the end of the day, sellers were able to push the prices back to the opening price.
This bearish candlestick pattern is usually seen at the end of an uptrend. A large red candle engulfs a smaller green candle which shows the strength of the bears. The prior bullish trend converts to a bearish trend.
In this particular candlestick pattern, the first candle is a bull candle and the second a bear candle. The bear candle has a small body compared to the bull candle.
Bullish Candlestick Patterns
Let’s go over some of the most basic bullish candlestick patterns that you will come across when analyzing this type of graph.
The hammer candlestick pattern actually has the same shape as the hanging mad pattern, with the difference being that this hammer pattern occurs in a downtrend, whereas the hanging man occurs in an uptrend.
This is a candlestick pattern that is usually observed at the end of a downtrend. It’s very similar to the shooting star pattern. The difference is the position in which it occurs.
This is a party bullish pattern. Here, open, high, and close prices are the same. This pattern implies that buyers and sellers were in a tough fight, and that buyers were able to push the prices to the closing price.
This bullish candlestick pattern is usually seen at the end of a downtrend. A large green candle engulfs a smaller red candle which shows the strength of the bulls. The prior bearish trend converts to a bullish trend.
In this particular candlestick pattern, the first candle is a bear candle and the second a bull candle. The bull candle has a small body compared to the bear candle.
Forex Candlestick Patterns – Final Thoughts
As you can see, figuring out candlestick graphs and reading candlestick patterns is not all that easy. Yes, it takes some knowledge and lots of practice. However, if you read candlestick patterns correctly, you really can make a killing on the Forex market. For more information, we would recommend watching the included video. If you want to become a truly profitable day trader, especially in Forex, we would recommend joining the Income Mentor Box Day Trading Academy.
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