A candlestick price chart is used in technical analysis to display the results of prices of a security for a particular time, whether close or open or low or high. Japanese candlestick charts provide various visual clues to understand price and Forex Trading patterns by traders.
Forex candlestick patterns are mainly used to identify trading opportunities and predict the direction of moving prices. In this article, we will share 8 types of forex candlesticks data for you to look out for when trading.
- Best 8 Types Of Forex Candlesticks – Guidance To Use Forex Candlesticks
Best 8 Types Of Forex Candlesticks – Guidance To Use Forex Candlesticks
Forex candlestick patterns occur in the forex market, let’s look up the lists of 8 types of forex candlesticks.
- Marubozu Candle
- Doji Candle
- Engulfing candlestick
- Hammer Candle
- Shooting Star Candle
- Three-Line Strike Candle
- Three-Black Crows Candle
- Evening Star Candle
Different types of forex candlestick patterns are there, but in this article, we will be paying attention to the most popular 8 Types of forex candlesticks explained below:
#1 Marubozu Candle
- Black Marubozu – Black Marubozu is used to give awareness to selling pressure. Black Marubozu looks like rectangular candlesticks with little or no shadow at the top or bottom, which specify selling pressure and can hold the calling shots from the opening bell until the closing bell.
- White Marubozu – White Marubozu indicates that prices are being controlled by buying pressure. These are rectangular blocks with very little or virtually no shadows at the top or bottom, which indicate continuation in an uptrend while in a downtrend.
#2 Doji Candle
Doji, made up of a single candlestick used to display the price of a candlestick, is virtually the same whether it is close or open, resembling crosses or inverted crosses, or plus signs.
Doji represents the trend that is likely to continue. The shadows are an important indicator of market sentiment. The shadow at the top indicates the investors tried to push the price higher, and the shadow at the bottom indicates the presence of selling pressure. Understanding forex candlesticks helps us to gain easy money without any loss.
#3 Engulfing Pattern (Bullish/Bearish)
Why are forex candlesticks different because engulfing candlestick patterns leads to bullish or bearish markets. Both are indicated by a large candlestick extending higher and lower than the previous candlestick.
The larger the size is, the more significant it is to analysts. A black engulfing candlestick indicates a potential bearish reversal during an uptrend, and a white engulfing candlestick indicates a bullish reversal occurs in a downtrend.
#4 Hammer Candle
Hammers indicate bullish reversal occurs in an uptrend. Hammer candlesticks have a short body, with a shadow at the bottom twice as long. If the high and close are the same, consider the formation of a bullish candlestick pattern.
As when the open is the same as the high, hammers candlestick patterns are considered less bullish but still indicate a possible bullish trend.
#5 Shooting Star Candle
Shooting stars look like inverted hammers from above. It indicates that a bearish reversal is about to occur. They are created when the low, open, and close are close to each other, located high above, forming at least twice the length of the body.
When the low and closing prices are the same, a shooting star is considered a bull who tried to push prices higher but was overpowered by the bears, and prices closed to where they opened.
#6 Three-Line Strike Candle
The three-line strike pattern is three white candlesticks occurring on a daily chart time frame in a row. It indicates the prices were closed higher for three days. Three-line strikes occur at the end of a downtrend to suggest that a reversal might be in order.
#7 Three Black Crows Candle
Three-black crows are reversal forex indicators in an uptrend. It is indicated by three consecutive black candlesticks to analyze if the closing prices were lower than the opening price of the day.
The Formation of three consecutive black candlesticks with long bodies indicates the lack of buying conviction that allowed bears to successfully push prices lower on the market.
#8 Evening Star Candle
The evening star candlestick occurs at the top of an uptrend, consisting of three candlesticks. The first candlestick had a large green or white body to indicate the prices closed higher than the opening level.
The second candlestick is continued buying pressure in the market. It is small, with prices closing lower than the opening level. The third candlestick opens selling pressure reversed gains from the first day’s opening levels.
How To Read A Forex Candlesticks- Importance
There are several ways to read candlesticks for forex let’s look at those now,
- The price range between the open and closed positions is plotted as a rectangle on a single line.
- The close above the open shows the body of the rectangle is white.
- The close of the day below the open shows the body of the rectangle is red.
- Candlesticks can also show if the buyer or seller has control of the market.
- The wick or shadow at the top shows the highest price level reached that day.
- The wick or shadow at the bottom shows the lowest price level reached that day.
When you read a mention of 8 types of forex candlesticks, you can decide if a session is bullish or bearish based on the opening and closing prices. The closing price is higher than the opening price is called a Bullish Candlestick. The closing price is lower than the opening price is called a Bearish Candlestick.
Best 8 Types Of Forex Candlesticks – Forex Charts Explained
The best 8 types of forex candlesticks have 3 main charts: line chart, bar chart, and candlestick chart. The candlestick charts are mostly used in forex. Bar charts and line charts indicate price analysis in forex trading.
#1 Line Chart
The line chart connects the closing prices of the selected time. A line chart is held when assessing the limited trend to spot the cues like higher highs and higher lows.
#2 Bar Chart
A bar chart displays both highs and lows. It has 3 visual cues spotted in a single line. One vertical line displays the size of the move, a small point on the left displays the opening level, and a small point on the right displays the closing level.
#3 Candlestick Chart
The Candlestick chart is considered an improved bar chart version, which has 2 main elements: body and shadows.
- Body- It shows the range between the opening and closing prices.
- Shadow- It gives cues on price retracements and future price movements.
Top Reasons To Understand 8 Different Types Of Forex Candlesticks
Top reasons to understand 8 types of forex candlesticks: various candlestick patterns you can use.
Professional traders can use the most popular candlestick patterns to provide information on the three market sentiments, and there is a difference between simple and complex candlestick patterns.
- Simple Candlestick Pattern – Uses a single candlestick.
- Complex Candlestick Pattern – Uses two or more candlesticks.
The 8 different types of forex candlestick are most popular in day trading for two reasons:
- Offer a wide range of trading information.
- The design makes them easy to read and interpret.
How To Analyze Forex Candlesticks
The 8 types of forex candlesticks and diagrams are analyzed: They can be fine-adjusted based on your preferred trading strategy and set time frame. Some forex traders had focused on taking advantage of candle formations, while others attempted to spot price patterns.
However, when used in conjunction with other forms of analysis. Candlestick patterns are a useful indicator of potential trend reversals and price breakouts in the market, which help you to construct a stronger and more effective forex trading strategy.
Conclusion – Clear-Cut Understanding Of Forex Candlesticks
Candlestick charts are considered a useful tool to better understand the price action and order flow in the forex market. Better you choose the top 8 types of forex candlesticks mentioned above.
However, before reading a candlestick chart, you must understand what it is and become comfortable identifying and using candlesticks patterns for forex trading.