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  1. Beginner
    Early Stages for Beginners
    8 Topics
  2. Forex Terminology
    11 Topics
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    2 Topics
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    2 Topics
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    7 Topics
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    Identifying Scams
    2 Topics
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    5 Topics
  8. Technical Analysis
    13 Topics
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    5 Topics
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    Risk Management for Beginners
    8 Topics
  11. Fundamental Analysis
    9 Topics
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    Using Indicators
    6 Topics
  13. Technical Analysis (Part 2)
    8 Topics

Confluences with Candlesticks, near Support, & Resistance

It’s always great to trade from level to level using your support and resistance to act as a good confluence. However, most traders still try to look for several confirmations before safely trying to predict the direction the market will take. It’s best to have an open mind and go by pure price action.

In this market, traders have different biases all the time. While you may be looking for buys, other traders are looking for sells since this is a zero-sum game. If someone buys and wins, someone else sold and lost. The market will more than likely tell you what it wants to do, but it’s up to you to pay attention to candle closures, fundamental announcements, and other key factors to try and decipher what it’s saying.

That’s when you ask yourself these three questions:

  1. Do you see seller’s or buyer’s momentum?
  2. Did price break through that key level, or is it simply consolidating?
  3. Are there any announcements coming out?

Here are a few examples to help you understand the importance of certain candlesticks near a support or resistance. Now remember, the market can do what it wants. So even though the examples show the best possible scenario with the candlesticks we see, there can always be a certain level of market manipulation that takes place. This is why it’s always best to sometimes have at LEAST 3 CONFLUENCES before entering the market so you can be confident in your judgment. NOTHING is guaranteed in the market, so all you can do is have as many reasons as possible that justify you getting in the trade; so if they’re a winner, you know the reason why, and if they’re a loser, you can be okay knowing you didn’t over-leverage, and you didn’t buy impulsively – you had good reasons for entering! You just read it wrong.

Example 1:

As you can see, we start off with a shooting star at a resistance level, which gives us a good indication that price is about to head down. Price broke through the support level as the bearish marubozu candlestick closed in a new zone. Now support will turn into resistance as price makes its way down. Right as price hits the support level, we notice a morning star pattern form, which indicates a bullish reversal. Price begins to head up and break through our key level once again as seen by the closure of the bullish candlestick. This leads us right back to our resistance, turning into support as price makes its way back up. Last but not least, we notice a bearish engulfing near our new resistance, which shows us that price isn’t ready to break through that key level, so we see the market may be preparing to head back down.


Example 2:

We start off noticing dojis form on both the resistance and support, which shows us an indecision between both buyers and sellers. Typically, when you see them form in succession like that near a key level, chances are price won’t break through. As price moves its way back towards your support level, a hanging man appears, which in turn means sellers are about to take control. Price begins to break through two levels as seen by the bearish momentum candles (marubozu) closing below each level of support. Price begins to exhaust near the support and a tweezer bottom forms right along the key level. This gives us an indication that price may be reversing back up.

These are all confluences! Price having a pattern on a key level mixed with other factors.