How to Trade Forex with

Japanese Candlestick Patterns

WHAT ARE THE JAPANESE CANDLESTICKS?

• Japanese candlesticks are a visual form for displaying charts invented in the 18th century by a Japanese rice trader named Munehisa Homma.

• They differ from bar charts and line charts, because they give more information and can be more easily read.

CLASSIFICATION

• Forex candlestick patterns are

classified within two types –

candlestick continuation

patterns and candlestick

reversal patterns

HOW TO USE JAPANESE CANDLESTICKS?

• Candlestick trading tends to be the most powerful when confirmed with additional indicators or when combined with Support and Resistance zones.

DOJI• 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.

SPINNING TOP• The Spinning Tops have undefined

character.

• Buyers and Sellers are fighting hard against each other, but none of them could gain dominance.

MARUBOZU• 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.

• The opposite holds for a bearish Marubozu candle.

HAMMER CANDLE AND THE HANGING MAN

• These candles have small bodies, small upper wick and long lower wick.

• These two candles look absolutely the same. They 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.

THE INVERTED HAMMER AND THE SHOOTING STAR

• These candles are mirror images of the Hammer and the Hanging Man.

• They have small bodies, small lower candle wick and long upper wick

• The Inverted Hammer and the Shooting Star both exhibit reversal behavior

ENGULFING PATTERN

• In the 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• The Tweezer Tops consist of a bullish

candle, followed by a bearish candle, where both candles have small bodies and no lower candle wick.

• Tweezer Bottoms consist of a bearish candle, followed by a bullish candle. Both candles have small bodies and no upper candle wick.

MORNING STAR• 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.

EVENING STAR• 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

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