Candlestick charts have a vast history in forex trading. Originating in the 18th century in Japan, they first used it to track the price fluctuations of rice. The credit for their widespread adoption in Western financial markets goes to Steve Nison, who introduced candlestick charting techniques to the Western world in the early 1990s. This innovative approach gave traders a visual representation of price action, incorporating open, close, high, and low prices for a specific time frame. Candlestick patterns quickly became a popular tool for technical analysis, enabling traders to identify market trends, reversals, and potential entry and exit points. Today, candlestick charts remain a fundamental aspect of forex trading and are extensively utilized by traders worldwide. The Best Forex Trading Platform In India provides more knowledge about trading.

Overview of the candlestick chart:

This is what a candlestick looks like,

Essential Components of Candlestick:

Like a bar chart, a candlestick shows the market’s open, close, high, low, and close prices for the day. A candlestick has a wide part called a “Real Body.” Candlesticks have two representations when the real body is filled in or black. It represents that the close price is lower than the open. If the real body is empty, it denotes that the close price is higher than the open. Above and below the real body are often seen the vertical lines called shadows, sometimes called wicks.

Bullish Candlestick:

  Usually, we represent the bullish candlestick in green color, where the open price increases by constant buying, meaning the buyers’ strength.

Levels of Bullishness:

Bullishness has five basic levels: most bullish, 2nd most bullish, normal bullish, neutral bullish, and least bullish. 

Bearish Candlestick:

We represent the bearish candlestick in red, where the open price decreases by constant selling, meaning the sellers’ strength.

Levels of Bearishness:

Bearishness has five basic levels: most bearish, 2nd most bearish, normal bearish, neutral bearish, and least bearish.

Candlestick Patterns:

The are many kinds of Candlestick patterns in trading. But knowing the basic and necessary patterns is much needed. Patterns help us to decide the market fluctuation and to plan our trading accordingly. Let us divide candlestick patterns into single candlestick patterns and multiple candlestick patterns. Some of the single candlestick patterns are Marubozu, Doji, and Hammer. Some of the multiple candlestick patterns are Engulfing, Harami, Morningstar, and Eveningstar. Let us discuss these patterns in detail.

Single Candlestick Pattern:

Marubozu:

Marubozu has a long body with small / No shadow. After this Marubozu pattern, it indicates the future trend continuation. When a Green Marubozu forms, it indicates that it will keep rising without falling. When a Red Marubozu forms, it indicates that it will keep falling without rising. A Marubozu with a higher volume is more powerful.

Hammer:

In the Hammer pattern, the shadow should be twice the size of the body. To identify trading signals, first, we have to recognize the trend. The prior trend should be as a downtrend; if any Bullish hammer pattern exists, there will be an up trend. If there is any Bullish Hammer candle, it will be a strong hammer pattern indicator.

Bearish Hammer / Shooting star pattern:

The shooting star’s upper shadow should be twice the size of the body. If the Shotting star hammer pattern happens after the up trend, there will be a downtrend.

Doji:

Doji Candle represents indecisiveness. It has a very short body, and its shadows will be long & equal.

 If there is Bearish Doji, the next day, if there is a Bearish candle, then there will be a downtrend.

If there is Bullish Doji, the next day, if there is a Bullish candle, then there will be an Uptrend.

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Multiple Candlestick Pattern:

Engulfing Pattern:

Engulfing means swallowing. If a candle seems like swallowing another candle, then that pattern is called Engulfing.

Bullish Engulfing:

After a downtrend, if a bullish candle acts like swallowing a bearish candle, then there will be an uptrend.

Bearish Engulfing:

After an Uptrend, if a bearing candle acts like swallowing a bullish candle, then there will be a downtrend.

Morning star:

The prior trend should be a downtrend at the end of the downtrend, there should be a Bearish candle-> Gap down-> Bearish/Bullish candle-> Gap up-> Bullish candle. After this pattern, there will be an uptrend.

Evening star:

The prior trend should be an uptrend at the end of the uptrend; there should be a Bullish candle-> Gap up -> Bearish/Bullish candle -> Gap down -> Bearish candle. After this pattern, there will be a downtrend.

Harami Pattern:

Bullish Harami:

Harami refers to the word “pregnant.”  To identify the harami pattern prior trend should be a downtrend, and a long Bearish candle should follow one Bullish candle; after this pattern, there will be an uptrend.

Bearish Harami:

To identify the harami pattern prior trend should be an uptrend, and a long Bullish candle should follow one Bearish candle; after this pattern, there will be a downtrend.

Conclusion:

Here, we have discussed candlesticks and their selected patterns. To start your trading, join the best forex trading platform in the world.