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Basic Candle Patterns
Remember before when I discussed bullish and bearish meaning up and down? Good. Using candle stick patterns we can identify if the pair is heading up or down. Pretty cool, right? It's not perfect but it is something to keep an eye on. It is a great mini tool to add to your trading arsenal. I know it seems hard... there are so many patterns, but once you've seen them enough times, you will remember. Soon enough you will be looking at a chart thinking 'oh an inverted hammer... I might short'
One major point before we start:
1. Candle patterns are more reliable on longer time frame charts (1hr+).
Now we are going to go through candle stick patterns. We will separate them into three categories: basic, bullish and bearish patterns. The rest is done alphabetically.
Basics
Marubozu
Pattern: Marubozu
Strength: Medium
What it means: A Marubozu occurs when there are no shadows on the candle. The high is the open and the low is the close or vice versa. A white Marubozu suggests that the bulls are totally in control and the bears are not affecting the market at all. It is a very strong bullish sign and obviously a black Marubozu is the opposite.
Doji
Pattern:Doji Star
Strength: Strong
What it means: A Doji means there is a strong fight going between the bears and the bulls. The bulls are giving it their all as are the bears; nobody has won the fight yet so it closes at open or close to it. Doji's are very important in predicting turn-arounds, as they often occur when a trend is dying out. If a Doji appears during an uptrend it suggests that the bulls are losing control and the trend is ending.
Spinning Top
Pattern:Spinning Top
Strength: Medium
What it means: A spinning top means there is a strong fight going between the bears and the bulls. The bulls are giving it their all as are the bears; nobody has won the fight yet so it closes at open or close to it. Spinning tops are very important in predicting turn arounds, as they often occur when a trend is dying out. If a spinning top appears during an uptrend it suggests that the bulls are losing control and the trend is ending.
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