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.
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 trader placing a long position on a trade.
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.
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.
An area that price often reacts to.
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.
A level where price bounces off of, also known as the ceiling. It works hand in hand with Support as it is the opposite but it does the same thing.
To sell or have sold a currency pair.
A level where price continues to bounce off of, also known as the floor. It works hand in hand with Resistance.
A bullish reversal pattern consisting of two Japanese candlesticks at the end of a downtrend. The first candle will be bearish, followed by the bullish candle. Both candles will have the same low and high point, indicating that sellers couldn’t push price further down and buyers are gaining momentum.
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
Confluences w/ Candlesticks, 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 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:
- Do you see seller’s or buyer’s momentum?
- Did price break through that key level, or is it simply consolidating?
- 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 so you can be confident in your judgment. NOTHING is guaranteed in the market so all you can do is to 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.
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.
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 it’s way back towards your support level, a hanging man appears, which inturn 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.