Over time, there are more variety of candlestick patterns in forex trading. It is ranging from the pattern of one bar candlestick, two bars, three bars and so on. However, of all these choices, there are some beneficial candlestick patterns that you should know. What are they?
Definition of Candlestick Patterns
According to Investopedia, candlestick is an ancient charting method from Japan that has proven its accuracy centuries ago until now. Although people have used it for so long, its popularity has become part of popular technical analysis.
The analysis with candlestick patterns includes in the discretional analysis method. Thus, technical analysis through candlestick patterns basically will rely on the intuition of a subjective trader to understand price patterns on a chart to become an actual trading execution. It takes experience and high flying hours so that this method is truly optimal to bring consistent profits.
Examples of Auspicious Candlestick Patterns
To make it easier for beginners to understand, beneficial candlestick patterns will follow the systematics of technical analysis in general. Besides, candlesticks have a standby level of “signal” and “confirmation”.
A “signal” level means that the candlestick has formed a pattern. It will indicate an up or down movement, but traders should not place a position yet. Meanwhile, the “confirmation” level means that the candlestick pattern already suggests that the trader places a position in the direction of the movement according to the pattern that appears.
Let’s check out the most profitable candlestick patterns:
Pinbar Pattern
Pinbar patterns are one of the most favorable candlestick patterns that appear on charts. This pattern is easily recognized because the long shape of the shadow is always longer than the body and shadow edge of the opponent (nose). The longer the shadow compared to the body and nose, the higher the indication that there will be a trend or reversal going on.
The formation of the pin bar candlestick pattern indicates market sentiment that was initially led in one direction but then reversed direction, leaving a long shadow trail. For example, when prices approach resistance or support limits, pin bars usually signal a reversal.
Inside bar pattern
This second favorable candlestick pattern usually appears most often when the trend has reached its highest or lowest point. The Inside Bar pattern represents the characteristics of two candlestick bars, where one of the bars is smaller and is between the range of the parent bar (Mother Bar). This favorable candlestick pattern indicates consolidation between seller vs. buyers, where both are still trying to pull each other until finally, one party loses and then the other party dominates to form a new trend. In its development, Engulfing patterns are also included in the Inside Bar pattern category.
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