Key Candlestick Patterns

The following are key candlestick patterns to look for:

When these patterns appear in a chart, and when they appear at levels that coincide with other indicators – such as Fibonacci retracement levels, or moving averages – they create a potential trading opportunity.

ASSIGNMENT: Identify a currency pair whose chart shows a candlestick formation noted in this lesson on its most recent daily candle. It is VERY IMPORTANT that the candle is closed; one of the most common errors that traders make is analyzing a candle that is still open. Determine whether this is a good entry point or not, based on how close support and resistance lines appear to the current price. If you do find a plausible trade, place an entry or market order to enter a position. If no good opportunities were available, tell us why you decided not to place a trade. If possible, try to focus on a longer time frame, such as a daily chart. You may use current or past situations.

Key Concept: Candlesticks Signal Reversals

· Candlesticks can be used to identify trend reversals in the market So why are candlesticks so important in trading? Simply put, it is because they are the best gauge of what is going on in the market at the present time. Candlesticks give us insight into the emotions of the market participants. Although traders may come and go over time, human emotion remains constant. A certain series of events creates a candlestick pattern, and when we see that pattern we know exactly what has transpired. Ultimately, candlesticks can easily be used to identify potential reversals of trends in the market – especially when used in conjunction with other indicators.