Candlestick Reversal Patterns in Forex: The Beginners’ Guide
‘Technical Analysis‘ is comprehensive to explain. To reassure you, it has the merit of putting it on an equal footing. Let’s start with the Candlestick Reversal Patterns in Forex.
Classic graphics are great for making presentations. You will also soon realize that they do not offer all the elements in your favor. So why do many investors and traders favor Japanese reversal candlesticks?
But before revealing the truth and their different technical configurations. A little theory doesn’t hurt.
What Are Japanese Candlesticks Reversal Pattern?
With Japan, we learn a lot. In particular, serenity. You have to do it in investment.
These Japanese candlesticks were designed to determine the price of rice. The story spread all over the world of finance to the four corners of the planet. Then they naturally imposed themselves on market participants.
Now let’s put the definition first.
Candlestick patterns are graphical stock models of technical analysis of Japanese candles. The traders use this to predict a reversal or continuation of a trend (trend) on the selected instrument’s trading chart.
Japanese candlesticks can translate a trend reversal. They can be used as signals to buy on supports and sell on resistance. The so-called reversal structures must be located on expected reversal zones previously identified by a Chartist analysis.
In the next few articles, we will show you some of the most interesting Candlestick Reversal Patterns.
Most Interesting Candlestick Reversal Patterns in Forex
The hammer is often a harbinger of an upside reversal. From a graphical point of view, it is often characterized by a candle in the shape of a square and a low wick.
It often appears after several sessions of decline or in an excessively bear market.
How should it be interpreted? Investors are skeptical that the share price will continue to fall. After a new low, they believe that the price is attractive for various reasons. They support action on this level with large volumes, if possible.
The Doji is a Japanese candlestick materialized by the absence of a body. The opening price is equal to the closing price. You find it everywhere. In a current trend or an illiquid action, it often generates false signals. But when it works, it is a warning sign of a trend reversal.
The hanged man
The hanged man is often a harbinger of a downward reversal. From a graphical point of view, it looks like a hammer.
How should it be interpreted? Investors are skeptical that the share price will continue to rise. After a new high, they believe that there is nothing to justify buying. They are looking for downward pretexts. Taking profits does not hurt.
There are two types of stars to be aware of: the morning and evening stars.
The evening star takes shape following an upward movement. Typically, it indicates a bearish reversal of the stock.
The morning star takes shape following a downward movement. Typically, it indicates a bearish reversal of the stock.
It resembles the evening or morning star. Except the second candle is Doji, and the gaps are mandatory.
The abandoned bullish baby usually arrives following a bearish movement. On the other hand, the abandoned bearish baby usually arrives following an upward motion.
Consider it a good starting point. Rest assured, we remind you that you do not have to know them all from A to Z. You will see with the practice that this is not the least of your worries.