What are Candlestick Chart Patterns

In forex trading, you’re going to come across many different patterns in charts of various currency pairs. These patterns are actually there to guide you and give you hints about what the market is going to do next. Candlestick chart patterns can help you make accurate predictions.

If you’re new to forex trading, you might want to subscribe to the top forex signals as they are produced by experts who analyze these chart patterns for you. This way, you don’t have to memorize them yourself. Here are the best candlestick chart patterns if you’re a beginner:

The Morning Star

The appearance of the Morning Star marks the completion of a bearish trend and predicts a subsequent upward movement. It is made up of a total of three candlesticks in its whole. The market is now experiencing a downward trend, as shown by the first candle. It suggests that the trend toward decline will continue in the future.

The second candle is a Doji candle, which is a special type of candle. It is a sign that there is a lot of uncertainty in the market. The third candle is what’s known as a bullish candle. It is an indication that positive market circumstances are going to arise and that a trend reversal is likely to occur in the near future. It is essential to ensure that the real bodies of the first and third candles do not in any way interact with the second candle during the process.

The Evening Star

The Evening Star is formed following the trend in the opposite direction, which indicates a downward reversal. It is made up of a total of three candlesticks in its whole. A bullish trend in the market is indicated by the first candlestick’s price action. It is evident that the current rising trend will maintain its momentum.

A Doji candlestick is used as the second candlestick. It is a sign that there is a lot of uncertainty in the market. The third candlestick illustrates a downward trend in the market. It is an indication that there will be a change in the direction that the market is moving in and that negative conditions will arise. The actual bodies of the first and third candles must not have any evidence of the presence of the second candle anywhere within them.

Piercing Pattern

It is possible to create the piercing pattern by combining many different candlestick chart patterns. The formation of this pattern marks the conclusion of a bearish trend and signals a turnaround to the upside. The Piercing design has a pair of candles in its composition. A negative trend has been exhibited by the market, as represented by the first candle. It is a sign that the negative trend will continue in the foreseeable future.

The second section of the chart exhibited the formation of a bullish candle. However, it closes more than fifty percent of the real body of the preceding candle, which means that the gap in the downward direction is now open. It is also an indication that things will turn around for the better at some time in the foreseeable future. On the next day of trading, investors are anticipated to initiate long positions if a bullish candle appears.

Bullish Engulfing

The Bullish Engulfing chart pattern is created by combining several candlesticks. This pattern arises to indicate a turnaround in the upward direction after a period of time during which prices have been declining. It consists of a pair of candlesticks joined together. The first candlestick would burn out, and the second candlestick would take its place.

A Bullish Engulfing is the name given to this pattern as a result of the traits that it possesses. A powerful bullish candle would be represented by the second candlestick. Additionally, it suggests that the market is currently optimistic once more. Participants in the market will have the option to open long positions the next day if a bullish candle emerges on the chart. They also have the choice to place a stop-loss order at the lowest position of the second candle if they are concerned about losing money.

Bearish Engulfing

The bearish engulfing pattern consists of several different candlesticks coming together in a certain way. The fact that it appears after an upward trend suggests that it will eventually reverse to a negative trend. It is made up of two candles placed side by side. The first candlestick has been fully extinguished by the second candlestick.

The first candle is a bullish candle, which indicates that an upward trend will most likely continue in close proximity to the present. The second candlestick is a long bearish candle that completely obliterates the first candle as a standalone entity.

It is a sign that negative market conditions are getting ready to reassert themselves in the market. The next day, investors will have the option to initiate short positions in the event that a bearish candle appears. Additionally, they have the choice to place a stop-loss order at the highest position of the second candle if they so want.

Three Inside Up

The Three Inside Up pattern is created by combining many candlestick patterns into a single pattern. It is formed at the end of a downward trend, which is seen as a bullish reversal. The first candlestick is a highly reliable signal of a bearish market. The size of the second candlestick is rather small, and it is a bullish candle. It is going to be close to the first candlestick.

The third candlestick represents a very bullish continuation of the trend. The third candlestick provides further evidence that the bearish trend has been broken. When this candlestick pattern is complete, market players may want to think about entering a long trade.

Three Outside Up

The Three Outside Up pattern is formed at the end of a downward trend, which is seen as a bullish reversal. It is comprised of a total of three candlesticks in its whole. A bearish short candle is shown by the first candlestick in the chart.

The second candlestick illustrates a large candle that represents an optimistic outlook. It is essential that the first candlestick be completely covered by the second candlestick. The third candlestick in the sequence represents a powerful bullish candlestick in this representation.

The appearance of the third candlestick substantiates the continuation of the bullish trend. Between the first and second chart patterns, there ought to be a Bullish Engulfing candlestick pattern present. When this candlestick pattern is complete, market players may want to think about entering a long trade.

Final Verdict

There are countless candlestick chart patterns in the forex markets. If we were to discuss all of them, we’d probably be here all day. Nonetheless, the few we discussed today are the ones you’ll most likely see very often, and they are also easy to understand for beginners. Always remember to use proper risk management techniques when making money in forex trading.