Japanese candlestick patterns forex cargo

An established trend is a requirement for trading this particular candlestick pattern. The reason for this is that the inside bar is nothing more than consolidation. So we have a strong trend followed by consolidation which leads to a breakout in the prevailing direction.

Pretty simple stuff, right? Note that the pair had been in a downtrend for several months, therefore these are bearish continuation patterns. You could make the case that the first signal in the chart above was also a pin bar, and I would agree. The combined rejection of former support and consolidation made for an incredibly profitable trade setup. To learn more about inside bars, including which ones to trade and which ones to avoid, check out my detailed lesson on trading the inside bar pattern.

Unlike the inside bar that we just studied, this formation most often signals a reversal in the market. Why do I call it a misunderstood pattern? Because it takes more than an engulfing candle to warrant a position. To be considered tradable, an engulfing candle must develop at a key support or resistance level and after an extended move up or down. For it to be profitable, an engulfing pattern must form at a swing high or low. Only then can it be used to formulate a trade idea.

Hence the name, this is the most prominent and significant feature of this pattern. While the engulfing bar pattern is my third favorite Forex candlestick pattern, it can be extremely telling if properly utilized. Here are a few things to keep in mind when trading them… They typically signal a forthcoming reversal These patterns should only be utilized on the daily time frame and after an extended move up or down If used as an entry signal, your stop loss should be placed above the engulfing bar high for a bearish pattern and below the engulfing bar low for a bullish pattern For a higher probability setup, always combine them with other favorable methods or techniques.

In fact, there were two back-to-back formations at key resistance. As you can see, the pair had carved out a wedge pattern. The two bearish signals formed at resistance, creating two profitable opportunities. Know that the first candlestick in the chart above is also a bearish pin bar or at the very least a bearish rejection.

Always remember that a bullish engulfing pattern at a swing low is a sign of potential strength. It signals that the current downward momentum is likely coming to an end. Alternatively, a bearish engulfing pattern at a swing high is a sign of potential weakness. If you see one form in this manner, the chances are good that an increase in selling pressure is on its way.

Last but certainly not least, both candlestick patterns must form at a key level to be tradable. Otherwise, you may find yourself trading a lot of false positives. Final Words Whether you trade using raw price action or some other means of identifying favorable setups, the three candlestick patterns above will surely improve your trading.

As lucrative as these formations can be, always remember that there are never any guarantees. Just like any other Forex trading strategy, the three above can and do fail, so always protect yourself. Last but not least, the pin bar, inside bar and engulfing pattern are most useful when combined with other confluence factors. By doing this, you greatly increase the odds of a successful trade. General FAQ What is a candlestick pattern? Unsure about which type of FRG file you have? If you are aware of any other file formats using the FRG file extension please contact us so that we can update our information accordingly.

To begin your free file analysis simply drag-and-drop your FRG file inside the dotted lines below or click"Browse My Computer" and select your file. The fastest and easiest way to open your FRG file is to double-click it. If your PC opens the FRG file but it's the wrong application you will need to change your Windows registry file association settings.

Each program contains a different type of data and you need specialized software to properly work with the FRG file. If after installing the program from a list you still cannot open a file with the FRG extension the reason may be that the file is damaged.

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Take a look at this image: The Doji candle has a reversal character when it is formed after a prolonged move. The reason for this is that during a bullish or bearish market, the occurrence of a Doji candle indicates that the bulls are losing powers and the bears start acting with the same force. Thus, the candle closes wherever it was opened. Just remember: when you get a Doji on the chart after a prolonged move, there is a chance that the price will reverse its direction. Spinning Tops undefined This candle could be bearish and bullish.

It has a very small body and longer upper and lower candle wick, which have approximately the same size. Have a look at the image below: The Spinning Tops have undefined character. The reason for this is that this candle indicates that buyers and sellers are fighting hard against each other, but none of them could gain dominance.

Nevertheless, if we get this candle on the chart during a downtrend, this means that the sellers are losing steam, even though buyers cannot prevail. Marubozu continuation This is another easy to recognize candle. The Marubozu candlestick has a body and no candle wick as shown below: The Marubozu candle is a trend continuation pattern.

Since it has no wicks, this means that if the candle is bullish, the uptrend is so strong that the price in the candle is increasing and never reaches below the opening of the bar Hammer and Hanging Man reversal The Hammer candle and the Hanging Man candle have small bodies, small upper wick and long lower wick.

These two candles look absolutely the same. Here they are: These two candles are classified as reversal patterns. The difference between them, though, is that the hammer indicates the reversal of a bearish trend, while the hanging man points to the reversal of a bullish trend. They have small bodies, small lower candle wick and long upper wick as shown below: The Inverted Hammer and the Shooting Star both exhibit reversal behavior, where the Inverted Hammer refers to the reversal of a bearish trend, while the Shooting Star indicates the end of a bullish tendency.

Double Candlestick Patterns Bullish and Bearish Engulfing reversal The Bullish Engulfing is a double bar candlestick formation, where after a bearish candle we get a bigger bullish candle. Respectively, the Bearish Engulfing consists of a bullish candle, followed by a bigger bearish candle.

Have a look at this image: The two forex candles indicate trend reversal. In both the Bullish and Bearish Engulfing pattern formation the second candle engulfs the body of the first. The Bullish Engulfing indicates the reversal of a bearish trend and the Bearish Engulfing points the reversal of a bullish trend. Tweezer Tops and Bottoms reversal The Tweezer Tops consist of a bullish candle, followed by a bearish candle, where both candles have small bodies and no lower candle wick. The two candles have approximately the same parameters.

At the same time, the Tweezer Bottoms consist of a bearish candle, followed by a bullish candle. Both candles have small bodies and no upper candle wick as shown in the image below: As we said, the two candles of the Tweezers have approximately the same size. Both candlestick patterns have reversal character.

The difference between these two formations is that the Tweezer Tops signal a potential reversal of a bullish trend into a bearish, while the Tweezer Bottoms act the opposite way — they could be found at the end of a bearish trend, warning of a bullish reversal.

Triple Candlestick Patterns Morning Star and Evening Star reversal The Morning Star candlestick pattern consists of a bearish candle followed by a small bearish or bullish candle, followed by a bullish candle which is larger than half of the first candle. The Evening Star candle pattern is the opposite of the Morning Star pattern. The reason for this is that this candle indicates that buyers and sellers are fighting hard against each other, but none of them could gain dominance.

Nevertheless, if we get this candle on the chart during a downtrend, this means that the sellers are losing steam, even though buyers cannot prevail. Marubozu continuation This is another easy to recognize candle. The Marubozu candlestick has a body and no candle wick as shown below: The Marubozu candle is a trend continuation pattern.

Since it has no wicks, this means that if the candle is bullish, the uptrend is so strong that the price in the candle is increasing and never reaches below the opening of the bar Hammer and Hanging Man reversal The Hammer candle and the Hanging Man candle have small bodies, small upper wick and long lower wick. These two candles look absolutely the same. Here they are: These two candles are classified as reversal patterns. The difference between them, though, is that the hammer indicates the reversal of a bearish trend, while the hanging man points to the reversal of a bullish trend.

They have small bodies, small lower candle wick and long upper wick as shown below: The Inverted Hammer and the Shooting Star both exhibit reversal behavior, where the Inverted Hammer refers to the reversal of a bearish trend, while the Shooting Star indicates the end of a bullish tendency. Double Candlestick Patterns Bullish and Bearish Engulfing reversal The Bullish Engulfing is a double bar candlestick formation, where after a bearish candle we get a bigger bullish candle.

Respectively, the Bearish Engulfing consists of a bullish candle, followed by a bigger bearish candle. Have a look at this image: The two Engulfing candle patterns indicate trend reversal. In both the Bullish and Bearish Engulfing pattern formation the second candle engulfs the body of the first.

The Bullish Engulfing indicates the reversal of a bearish trend and the Bearish Engulfing points the reversal of a bullish trend. Tweezer Tops and Bottoms reversal The Tweezer Tops consist of a bullish candle, followed by a bearish candle, where both candles have small bodies and no lower candle wick. The two candles have approximately the same parameters.

At the same time, the Tweezer Bottoms consist of a bearish candle, followed by a bullish candle. Both candles have small bodies and no upper candle wick as shown in the image below: As we said, the two candles of the Tweezers have approximately the same size.

Both candlestick patterns have reversal character. The difference between these two formations is that the Tweezer Tops signal a potential reversal of a bullish trend into a bearish, while the Tweezer Bottoms act the opposite way — they could be found at the end of a bearish trend, warning of a bullish reversal.

Triple Candlestick Patterns Morning Star and Evening Star reversal The Morning Star candlestick pattern consists of a bearish candle followed by a small bearish or bullish candle, followed by a bullish candle which is larger than half of the first candle. The Evening Star candle pattern is the opposite of the Morning Star pattern. It starts with a bullish candle, followed by a tiny bearish or bullish candle, followed by a bearish candle which is bigger than half of the first candle. The image below will illustrate the two formations: Both of these candlestick groups have reversal character, where the Evening Star indicates the end of a bullish trend and the Moring Star points to the end of a bearish trend.

Three Soldiers reversal The Three Soldiers candlestick pattern could be bearish or bullish. The Three Bullish Soldiers consists of three bullish candles in a row: A smaller bullish candle A bigger bullish candle, which closes near its highest point An even bigger bullish candle, which has almost no candle wick At the same time, the confirmed Three Bearish Soldiers should have the following characteristics: A smaller bearish candle A bigger bearish candle, which closes near its lowest point An even bigger bearish candle, which has almost no candle wick The image below displays a valid Three Bullish Soldiers and Three Bearish Soldiers: The Three Soldiers candlestick pattern has a reversal character.

The Three Bullish Soldiers candlestick pattern can end a bearish trends and can bring about a new bullish movement. At the same time the Three Bearish Soldiers could be found at the end of bullish tendencies, signaling an upcoming bearish move. Candlestick Chart Analysis Now that we have gone through some of the more reliable candlestick patterns in Forex trading, we can now see how some of these patterns look on a price chart and how we can use them as part of a price action trading strategy!

Our candlestick chart analysis shows three successful bearish chart patterns. The first one is an evening star. As we already mentioned, the Evening Star candlestick chart pattern has a bearish character. This is exactly what happens on our chart.

We get four bearish candles which corresponds to a drop in price of pips. The second pattern we get from our candlestick analysis is the Hanging Man candle at the end of a bullish trend. After the appearance of the Hanging Man candle, the price of the euro decreased versus the dollar about pips for three days! The third candlestick pattern on our chart is another Evening Star. At the end of the bullish trend, the Evening Star pattern followed thru with a drop of 40 pips for one day.

As you see, this chart image is pretty rich with Japanese candlestick patterns. We first start with a Doji candle after a strong price decrease. We get the Doji reversal pattern and we record an increase of 97 Pips. The next candlestick pattern we get is the Three Bullish Soldiers, which appears after a slight price retracement.

The third candle pattern on the chart is the Spinning Top, which as we said has undefined character. This means that after a Spinning Top candle, the price might either increase or decrease, depending on the context of price action at the time. In our case, the price reverses its direction on the following bar, which also forms a Morning Star pattern, and we observe an increase of pips.

The price increase after the Spinning Top is immediately followed by another Doji reversal pattern. As a result of that, we get a rapid drop of pips. The last candlestick pattern on the chart is a single Hammer candlestick after a bearish trend. We confirm our Hammer and the price of the dollar increases about pips.

We start with a small Doji candle after a trend correction. The result we get after the Doji is a rapid price increase of 62 pips. Then after a period of price consolidation, we get a Bearish Engulfing. A single candle drop of 39 pips appears on the chart right after the Engulfing!

Not long after, we get another Bearish Engulfing, which comes after a correction in a bearish trend.

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They differ from bar charts and line charts, because they give more information and can be more easily read. The two candles displayed are a bullish green and a bearish red candle. Each candle shows the price at which the candle the time frame was opened, the price at which the candle was closed, the highest and the lowest price reached. Now look how Japanese candlesticks looks on a price chart. How to use Japanese candlesticks?

A Japanese candlestick chart provides the trader with crucial information about price action at any given point in time. Traders often confirm their signals with Japanese candlestick patterns, improving the odds of success on a trade. Trading price action using candlestick analysis alone is a very common trading technique.

Candlestick patterns in Forex are specific on-chart candle formations, which often lead to certain events. If recognized on time and traded properly, they can assist in providing high probability setups. Forex candlestick patterns are classified within two types — candlestick continuation patterns and candlestick reversal We will now go through the most common reversal and continuation patterns and we will discuss their potential. We have a Doji whenever the price closes at the exact same level where it has opened.

Thus, the Doji candle looks like a dash with a wick. In these cases the Doji candle is simply a dash with no wicks. Take a look at this image: The Doji candle has a reversal character when it is formed after a prolonged move. The reason for this is that during a bullish or bearish market, the occurrence of a Doji candle indicates that the bulls are losing powers and the bears start acting with the same force.

Thus, the candle closes wherever it was opened. Just remember: when you get a Doji on the chart after a prolonged move, there is a chance that the price will reverse its direction. Spinning Tops undefined This candle could be bearish and bullish. It has a very small body and longer upper and lower candle wick, which have approximately the same size. Have a look at the image below: The Spinning Tops have undefined character. The reason for this is that this candle indicates that buyers and sellers are fighting hard against each other, but none of them could gain dominance.

Nevertheless, if we get this candle on the chart during a downtrend, this means that the sellers are losing steam, even though buyers cannot prevail. Marubozu continuation This is another easy to recognize candle. The Marubozu candlestick has a body and no candle wick as shown below: The Marubozu candle is a trend continuation pattern.

Since it has no wicks, this means that if the candle is bullish, the uptrend is so strong that the price in the candle is increasing and never reaches below the opening of the bar Hammer and Hanging Man reversal The Hammer candle and the Hanging Man candle have small bodies, small upper wick and long lower wick. These two candles look absolutely the same. Here they are: These two candles are classified as reversal patterns. The difference between them, though, is that the hammer indicates the reversal of a bearish trend, while the hanging man points to the reversal of a bullish trend.

A hanging man pattern is shown on the following chart. A three inside up pattern begins with a bearish candlestick, followed by a bullish candlestick which forms inside the first candlestick, and followed by a third bullish candlestick which closes well above the high of the first candlestick. A three inside up pattern is shown on the following chart.

A three inside down pattern is shown on the following chart. Doji pattern The final candlestick pattern which we are going to cover, and also one of the most important Forex chart candlestick patterns, is the doji pattern. The doji pattern is a specific candlestick pattern formed by a single candlestick, with its opening and closing prices at the same, or almost the same level.

A doji pattern signals market indecision. Neither buyers nor sellers managed to move the price far away from the opening price, signaling that a price reversal may be around the corner. A doji pattern is shown on the following chart. As you can see, a doji pattern can form both during an uptrend and downtrend. How to trade Forex based on candlestick patterns Candlestick patterns are a great tool used by many Forex traders to confirm a trade setup.

They should not be used to trade on their own, as they can produce a large number of false signals along the way. Forex candlestick strategy As we've previously stated, the best Forex trading candlestick strategy is to use candlestick patterns for trade setup confirmations. Once the engulfing pattern forms, a trade could enter in the direction of the pennant breakout. Once the pullback is completed, a bullish engulfing pattern confirms the opening of a trade in the direction of the breakout.

Bear in mind that these are only two examples of how to use candlestick patterns. You can combine them with all types of chart patterns and trading strategies. Final words Candlestick patterns are a great tool for trade confirmations.