An analysis of price going down. When a trader is bearish on a pair, they think the market will be heading down. A trader is a bear in the market when placing or holding short positions.
A bearish candlestick formation consisting of 2 candlesticks. A bullish candle followed by a bearish candle that ENGULFS the previous candle bringing price further down, which indicates there are more sellers than buyers in the market.
An analysis of price going up. When a trader is bearish on a pair, they think the market will be heading up. A trader is a bull in the market when placing or holding long positions.
A bullish Japanese candlestick formation consisting of 2 candles. A smaller bearish candle followed by a bullish candle that ENGULFS the previous candle bringing price higher up. This formation indicates there are more buyers than sellers in the market.
A chart consisting of vertical bars (candles). Those candles will tell you the highest and lowest point price went to and the open and close. The wick of the candle will show the highest and lowest point price reached during that time frame, and the body will show where price opened and closed. If the CLOSE price is higher than the open price, price went up. If the close price is LOWER than the open price, price went down.
An indecision candlestick where the open and close of the candle are equal or close to one another. A wick will be at the top and bottom resembling a cross.
A bearish reversal formation consisting of 3 candlesticks. The first candle will be bullish, followed by an indecision candle and ending with a bearish candle. This is found at the top of an uptrend. With other bearish confirmations, traders will look to place short positions.
A tool used by technical traders can be used to distinguish retracements from reversals in the market. A Fibonacci retracement tool can help you find entries, set a take profit, and a stop loss.
The assessment of news, outside influences, external events, political forces or data that can influence a country’s economy and have an effect on future price movement within the market.
A Japanese candlestick with no upper wick and the bottom wick at least twice the size of the body. It is a bearish candle and can be validated by the candles surrounding it.
A bullish reversal Japanese candlestick found at the bottom of a downtrend. It has a long wick at the top and the close is near the open. This candle indicates sellers exhaustion and a potential push to the upside by the sellers.
A bullish reversal formation consisting of 3 candlesticks. The first candle will be bearish, followed by an indecision candle and ending with a bullish candle. This is found at the bottom of a downtrend. With other bullish confirmations, traders will look to place long positions.
BeginnerEarly Stages for Beginners8 Topics
Forex Terminology11 Topics
- Major and Minor Currency Pairs
- Basic Forex Terminology
- Pips & Ticks
- The Broker & The Spread
- What is a Lot?
- Stop Loss & Take Profit
- Margin & Leverage
- Retracement & Reversal
- When Can I Trade Forex? Sessions - Market Open and Close
- 3 Types of Analysis (Technical, Fundamental, Sentiment)
- 3 Ways a Market Can Go (Up, Down, Sideways)
Margin & Leverage2 Topics
IntermediateIdentifying Scams2 Topics
Brokers for Beginners5 Topics
Technical Analysis13 Topics
- Types of Charts
- Understanding Japanese Candlesticks
- Candlestick Patterns For Beginners
- Single, Double & Triple Candlestick Patterns
- Support and Resistance
- Confluences w/ Candlesticks & Support & Resistance
- Counter Trend Trading/ Counter Trend Lines
- Moving Average
- Top-Down Analysis
- Consolidation Trading (Breakout, Retest, Continuation)
AdvancedUsing Indicators6 Topics
Technical Analysis (Part 2)8 Topics
Market Structure5 Topics
Fundamental Analysis9 Topics
CompletionRisk Management for Beginners8 Topics
Psychology for Beginners7 Topics
Personal Psychology Questions2 Topics
Candlestick Patterns for Beginners
The great thing about using candlesticks, is that they form many different patterns that could easily help us determine the direction that price wants to go. To keep things simple, we’re going to start with a few easy candles to remember: doji, marubozu, and spinning top. This may all sound foreign to you, but bare with us. By the end of this beginners section you’ll know all the terminology!
Although looking at a doji on a chart, you may think it doesn’t show much, but it shows a lot! It shows us a lot of indecision in the market. This means that there are the same number of buyers, as there are sellers so the market isn’t really moving! Neither the bulls nor the bears can gain momentum. You will most likely see them at the end of a trend or near a support or resistance level, so play close attention to the candlesticks that follow.
A Marubozu is a candlestick pattern that gives you confirmation that the current trend is a true trend. Meaning, if price is heading up, and you see a reversal candle, most times a marubozu candle follows to confirm that price is about to head down. They consist of big bodies and barely have any wicks. They show you that momentum is clearly heading in whatever direction the marubozu is heading.
Spinning tops, just like dojis, show us indecision within the market. They have very small bodies, which tells us that price has a very little difference between it’s open and close. Both buyers and sellers were fighting to gain control, yet none succeeded. Oftentimes, if you see one form at the end of a downtrend, it indicates that the sellers have bounced out of the market , and a possible reversal could take place! Same goes with the opposite direction! If you see one form at the end of an uptrend, that could signal that momentum is slowing down, the buyers have left and there’s a potential reversal lying ahead.
Seeing as we’ve touched base on a few of the basics, here’s a beginners guide to market direction! Now remember, don’t just form your bias based on candlesticks, there are still many other confluences you need to look for before choosing “BUY” or “SELL.”
NOTE: A “confluence” in the market means a sign. It’s a mixture of all the signs that you have that verify your reason for getting in a trade. For example: If someone asks you: “what were your confluences for getting in a trade?” Basically it means what were the signs you saw/what were your reasons for getting in!
Potential Confluences: (we’ll discuss more later).
- Fundamental Announcement came out
- Saw a candlestick pattern
- Saw a candlestick pattern at a major level
- Used Fibonacci
- Moving Averages Crossed Over
- Price broke the Trendline
- Price is bouncing off the Trendline
And MANY MORE. We’ll go into this deeper as this section ends.
Note that a Hammer and Hanging Man both look the same visually, as well as similarities between an Inverted Hammer and a Shooting Star. The only way to really tell the difference between them, will be to look at the market direction prior to seeing that candlestick.