There are several candlestick patterns to learn. However, we have chosen two of the most common patterns that help the beginners to easily build understanding of the market.
Doji candlestick – Forex candlestick pattern
Finding this type of figure on the chart will not be difficult since it is distinguished from the total mass by an extremely small body volume and a long shadow.
There are no special requirements for symmetry and length – they are of secondary importance, while the attributes of the body have a great influence, ranking in one of three categories:
1. Narrow dark. The asset’s value at the opening will be only insignificantly (from now on, “insignificant” means that the ratio of the height to the width of the candlestick body will be 1k5 or less) will exceed the price at the close.
2. Narrow light. The opening price will be slightly less than the closing price.
3. Line. Here, the value at the opening and the close are approximately at the same level.
The appearance of the Doji candlestick on the chart hints at a suspended state of the market and the preservation of the previously set trend in the current period.
Piercing Line – Another Known Type of Candlestick Pattern
This pattern is based on two candlesticks. The first bearish – on the chart is indicated in red or black and should be as long as possible. The second opens with a gap down and exceeds the bearish candle by 50 +%.
Thanks to this pattern, you can get information that some market participants are disappointed with the change in the market trend. It is best to use the Piercing Line when trading with a trend retracement. A popular option among many traders is that immediately start opening positions (buying or selling is not important) as soon as a signal appears.
Another method is to place pending orders on the second candlestick – within 50 points up or down. But, again, it all depends on where the trend is supposed to move. In the case of a bullish trend, you should place buy orders. But if the price chart does not rush along the expected trajectory but makes a reversal, the pending order should be deleted.
Should we pin our hopes on candlestick patterns?
Above, the most powerful Forex candlestick patterns were presented in the pictures. Still, in addition to them, others can also be used in your own or borrowed trading strategies with varying degrees of effectiveness. One way or another, every trader should remember a simple truth. By themselves, no candlestick patterns are trading signals, and they cannot act as the only means of determining the points of entry to the market. Models only allow you to get an idea of market sentiment, to get data on what changes are likely to occur soon. The second important point concerns the accuracy of the forecasts. Forecasting reliability increases at higher time intervals (Daily and above) and decreases at short-term intervals due to market noise.
One of the most popular and effective tools at the moment – “Bheurekso Pattern”, easily recognizes popular formations and puts convenient text marks on the chart, thanks to which the trader becomes much more comfortable working.