Candlestick analysis is one of the ways to assess the Forex market with no reference to its key indicators. To implement such an approach, you need to find the required combination of “candles” on the chart. Candlestick patterns can consist of one, two, three or even more candles. These can predict the continuation of the trend or its end, allowing you to make a profitable deal. In this post, we will talk about the main candlestick patterns. Keep reading to know how they look and how to use the basic candlestick patterns in trading in South Africa.
Table of Contents
#1 – Shooting Star & Inverted Hammer Candlestick Patterns
These patterns in the Price Action strategy are called the Pin Bar. Both patterns consist of one candlestick with a long upper shadow and a short body. The opening price and the closing price of the candlestick are very close to each other. The Shooting Star candlestick pattern forms at the top of an uptrend, while the Inverted Hammer forms at the bottom of a downtrend. You can enter the market with a deal to sell a currency pair after breaking through the minimum value of the Shooting Star candlestick. To open a buy position, you should wait until the price breaks the high of the Inverted Hammer pattern.
#2 – Engulfing Candlestick Pattern
The Engulfing candlestick pattern consists of two oppositely directed candlesticks. It forms at the bottom of a downtrend, at the lowest level on the price chart. The first candlestick in the pattern has the direction of the existing trend. The second is directed against the main trend. It is necessary to keep in mind the two in order to make a profitable deal.
When it comes to the bullish candlestick in South Africa or another country, it forms at the top of an uptrend and signifies its completion. In the case of the Engulfing candlestick pattern, a sell trade is opened when the second candlestick of the pattern is broken. At the same time, the buy order is opened when the high of the second candlestick in the pattern is broken. The formation of a pattern at one of the strong support or resistance levels multiplies the signal.
#3 – General Hammer Patterns
This reversal candlestick pattern is similar to the previously mentioned approach. The only difference is the location of the long shadow. In the case of general Hammer patterns, it is at the bottom, and not at the top, as in the previous case.
The Hammer pattern is a candlestick with a long lower shadow that is at the end of a downtrend. The open and close prices in this model are close to each other. You can open a position on Forextime to buy a pair after the price breaks the high of this candlestick.
#4 – Hanged Man Pattern
The Hanged Man candlestick pattern is similar to its Hammer alternative – it is at the top of the uptrend. You can enter the market after breaking through its minimum. The most qualitative signal is considered to be when a strong downward candle follows after the Hanged Man candlestick is formed and an upward one after the Hammer candlestick. Nevertheless, deals can be opened even after the formation of the pattern, when the pair does not break through any of its extremes for some time.
#5 – Cloud Curtain Candlestick Pattern
This candlestick pattern is similar to an Engulfing pattern. For its formation, it is necessary that two candles form at the top of the uptrend. It is recommended that they have minimal shadows or none at all. The first candlestick should have a colour that matches the colour of the established trend. This signals that the pattern has been formed.
What Are Trading Patterns for?
The use of candlestick patterns in trading is suitable for both beginners and experienced traders. The patterns are easy to find on the chart. Their interpretation does not require special knowledge, and the effectiveness is not inferior to the effectiveness of trading systems using complex technical tools. So, if you are not a seasoned player and cannot call yourself an expert in Forex trading, knowing the above patterns will help you reach success.
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