Traders, whether professionals or beginners, can interpret messages given out by the market by analyzing movements through Forex candlestick patters. If you master these patterns, you will be able to predict the market’s next movements with higher accuracy.
There are actually many of these candlestick patterns that you may encounter, but not all of them are important. There are five bullish candlestick patterns that are worth knowing, however, and remember that you have to combine each with other indicators so you can make a more accurate prediction of price movement. In particular, these are reversal patterns, which you will typically see after a rally or pullback. Thus, they are not just important not just for beginners but for professionals as well.
The Hammer
This pattern is characterized by sellers being in command of the stock, decreasing the stock price as a result. It offers buyers the leeway to gain control of the stock and finish it on top. At this point when stock price is low, several professional traders jump in to take advantage.
The Doji
The doji, which represents indecision in the market, is the most popular pattern traders have known. It’ also crucial for traders to watch out for reversals where a doji shows up. They need to prepare for anything that may occur once this pattern comes up. Learn more about foreign exchange here at http://www.encyclopedia.com/topic/foreign_exchange.aspx.
The Harami
A harami pattern means the previous momentum has come to an end. In this pattern, the first candle appears to be wide-range. And then you see it closing close to the bottom of the range. In this scenario, sellers are in full control. By day two, however, a narrow-range candle will appears in its place.
Engulfing Pattern
The engulfing pattern seems to be each trader’s favorite among the rest. Here, there are two candles, and the first shows up on day one as a narrow-range candle. This tells you that sellers are not being so aggressive, though they are in control. The second forex candlestick patterns appears on day two. This time, it is wide-range and seems to “engulf” the first candle, hence the pattern’s name. This is when supply is low and demand is high.
Piercing Pattern
This is the same as the engulfing pattern and harami, where there are two candles. As a reversal pattern, the wide-range candle appears on day one, and closes down the bottom of the range. The sellers have this phase of the trade. Day two will show another wide-range candle, and it will close midway to the first candle. Therefore, when you’ve shorted the stock on the first day, you should expect to lose money on day two.
These five Forex candlestick patterns are the most popular, and you have to understand them as a neophyte. But you still have to look at other indicators when predicting price movements.
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