Trend Reversal Candlestick Patterns
The most important thing while trading trading is predicting the end of a trend well before the crowd. If you can spot candlestick trend reversal patterns accurately, you can become a highly successful trader. A candlestick body is formed with the opening and closing price of the stock,security or the currency pair and the wick is formed by the high and the low price. By taking a look at the candlestick charts, you can quickly judge the mood of the market whether the bulls are prevailing or the bears are prevailing!
Do you know about Hammers? Hammers have infact long lower shadow and a small upper shadow. What a hammer reveals is that after the price of the security opened on the market, sellers drove it down further. By the end of the day, buyers have recouped much of their losses to end the day near or at the high. No Hammer is complete without confirmation. If the price action directly after the Hammer is down, no hammer has taken place. A true Hammer cannot have its low violated by subsequent price action. Volume should also be taken into account. If the volume is heavy, the Hammer formed is genuine.
The other candlestick pattern as important as the hammer is the Hanging Man. Hammer is formed in the downtrend and the hanging man is formed in an uptrend. You will find the hanging man at the very top of the price action. This means that the uptrend is about to end and an downtrend is underway. Traders should take action accordingly.
The other important trend reversal candlestick patterns are the Bullish Engulfing Pattern and the Bearish Engulfing Pattern. A Bullish Engulfing Pattern appear at the end of a downtrend and gives the signal about the start of an uptrend. On the other hand, the Bearish Engulfing Candlestick Pattern appears at the end of an uptrend and signals that a downtrend will soon star.
The first candlestick represents a small body. The second candlestick opens higher than the previous candlestick close and closes lower than the previous candlestick open, thus engulfing the previous candlestick body.
In the last decade use of candlestick patterns have become highly popular among the traders. These candlestick patterns are just a few of the many that can be used in confirming a change in the price action.
Now, combining these trend reversal candlestick patterns with technical indicators can be a powerful combination.
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Get these 3 Swing Trading Systems FREE. Master these highly profitable Candlestick Patterns with this FREE 82 Page PDF Candlestick Guide.
by: Ahmad Hassam
Total views: 38
Word Count: 419
Date: Fri, 24 Sep 2010
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