subject: How to Understand Forex Candlestick Patterns [print this page] How to Understand Forex Candlestick Patterns
The basics of forex trading and making money from the trading of currency is learning how to analyze price trends and patterns and then making them a base for taking various trading decisions. Gone are those days when one used to rely only on the instincts, as now the stakes and risks associated with forex trading are relatively higher than what they used to be in earlier time.
If you are looking for one of the most popular forex trading charts then it is the forex candlestick chart. You should try to learn how to study the forex candlestick patterns, if you are really interested in making some handsome money in the currency market.
You need to be clear with a couple of things, one is that you need to finalize the basis on which you want to trade or not and second you have to find the appropriate time to do the same. These two factors will help you in achieving your aim.
Candlestick charts are simply visual representation of the prevailing market price in the current market. The reason why it is called candlestick chart is because its shape resembles that of candle.
If you want to look for ways in order to make good trading decisions, then here are few patterns that you should know, as they will guide you whether and when to trade.
You should try to get a general and complete picture of current currency movement. Try to know the difference between a bull market and bear market. The patterns that are reflected in these charts are read as bearish or bullish. Bearish market is called when the market is moving upwards, whereas if it is going down then it is called bullish market.
There are certain specific candlestick patterns that might come your way, following are some of them.
Hammer: It is so called because the candle pattern reflected in this chart has got a short body and a long wick, which makes it look like a hammer. These patterns indicate the decline of the current market and sign of possible reversal of the trend.
Engulfing: Engulfing is when you are seeing between two candlesticks. One engulfs the other one. Candle in day two engulfs that of previous day. In engulfing, second day opens at a much lower price than closing price of the other day's and closes higher than the previous days' opening price.
Doji: It is among the most popular candlestick popular one. It might sound confusion among some traders in the currency market. It is formed when the closing as well as opening of the price is almost virtually equal. The said patterns are formed in the candlestick chart as a plus sign or a cross. Sometimes, it's also shown as an inverted cross.
These are some candlestick patterns that you should gain mastery in, if you want to excel in forex market. Few other patterns that will help you in taking wise trading decision are piercing, shooting star, harami and kickers.
Keep in mind that these patterns are not the only thing which you need to consider before taking decision. These patterns combined with analytical tools will surely help you to make trading a success. To find high profit trading patterns pleaseclick here to read the 17 free Candlestick formations analysis besides the above mentioned ones.
