ForexCandlestick patterns every forex trader should know
A candlestick shows four prices for a period: the open, high, low and close. Patterns of one to three candles are used to judge whether buyers or sellers are in control, especially at key price levels.
How to read a candle
The body runs from the open to the close. A candle that closes higher than it opened is usually green or white; one that closes lower is red or black. The thin lines above and below, called wicks or shadows, show the high and low.
Because the forex market trades around the clock on weekdays, each candle usually opens near the previous close. Gaps mostly appear only over weekends.
Pin bars
Hammers and shooting stars are often called pin bars: a small body with a long wick of at least twice its length. The long wick shows price was pushed away from a level within the period.
Context matters more than the pattern
A hammer in the middle of a range means little. The same candle at a well-tested support level, in the direction of the larger trend, carries more weight. Many traders wait for the next candle to confirm before entering. See support and resistance.
Common mistakes
Frequently asked questions
What is the most reliable candlestick pattern?
No pattern is reliable on its own. Engulfing patterns and pin bars at clear support or resistance, in the direction of the larger trend, are among the most watched.
What timeframe is best for candlestick patterns?
Higher timeframes such as the 4-hour and daily charts give fewer but more meaningful signals than 1- or 5-minute charts.
What does a doji mean?
A doji has an open and close at almost the same price. It shows indecision and is most interesting after a strong move, where it can warn of a pause or reversal.