FOREX CANDLESTICK PATTERN

What are Candlesticks?

Calibrate their own trading with the fluctuations and reversals of larger, more influential participants in market, often referred to as “Smart Money”, so that traders can identify and participate in significant price moves.

The chart below demonstrates some of the innumerable patterns formed by candlesticks in the context of a daily price action chart. These patterns will be discussed and elaborated upon in the remainder of this guide.

DOJI CANDLESTICK PATTERN

A doji names a trading session in which a security has an open and close that are virtually equal, which resembles a candlestick on a chart. The word doji comes from the Japanese phrase meaning “the same thing.” A doji candlestick is a neutral indicator that provides little information

A Doji forms when the open and close of a candlestick are equal, or very close to equal.
Considered a neutral formation suggesting indecision between buyers and sellers–bullish or bearish bias depends on previous price swing, or trend.
Length of upper and lower shadows (wicks and tails) may vary giving the appearance of a plus sign, cross, or inverted cross.

HAMMER CANDLESTICK PATTERN

The hammer candlestick is one of the most popular candlestick patterns traders use to make sense of a securities’ price action. Most price action traders use this candlestick to identify reliable price reversal points. Moreover, this candlestick works well in all financial markets, including forex, stocks, indices, and cryptocurrencies.

The hammer is a bullish reversal pattern that appears after a long bearish trend. It has a petite body and long lower shadow. It is a price pattern with the opening, and closing prices remain close, indicating that bears have become active but closing the price near the opening level.

HANGING MAN CANDLESTICK PATTERN

The hanging man candlestick pattern is used when the market is bullish to identify signs of the market turning bearish.The hanging man is a bearish candlestick pattern that indicates a trend reversal. Each individual candlestick is constructed from four data points. The open, close, high, and low are them. These informational pieces help the knowledgeable trader understand the current state of the market.

The hanging man pattern is formed when the price opens higher than the previous day’s close but then drops significantly during the day, closing near or below the opening price. The pattern looks like a hanging man, hence the name.