Candlestick patterns are chart patterns in the field of trading that show precise price movements. Known for their accuracy, these patterns are employed by several today while Forex trading in Sri Lanka. Originated in Japan, the candlestick chart shows simplicity lined with precision, making it a convenient and reliable pattern to employ while trading currencies. This pattern displays the highs, lows, opening and closing points of a security bound to a time period.
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| List of patterns in Candlestick of Forex Trading |
Studying the OHLC Pattern in Candlestick:
Open: Open is used to show the opening price when a candle is formed in a trade. It is indicated by the top or bottom of the candlestick pattern.
High: During the candlestick pattern, the high indicates the highest trade carried out. This is often referred to as "top tail". When markets open at the highest points, there will be no top tail formation.
Low: Similar to the highs, lows indicate the lowest trades carried out during the candlestick pattern, this is often called "lower tail". When some markets start at their lowest, the low tail isn't observed.
Close: The last price traded during a candlestick pattern, this is indicated by the top or bottom of the body. Uptrend candles are shown in white, while downtrends in black.
Types of Patterns Observed in Candlesticks:
1) Bullish: When there is an increase in price, a bullish trend is seen with a longer body. This expansion indicates a growth in the markets.
2) Bearish: Similar to bullish trends, but of different color indications, bearish patterns indicate a price decrease in markets. The longer the candle projected, the more the price downfall.
3) Harami: A two candle representation, a smaller candle forms following which a larger one births.
4) Doji: The Doji pattern is seen when markets open and close simultaneously. Depending on this opening and closing, there are 4 types of Doji - Long-legged, Dragonfly, Gravestone and Four Price.
5) Hammer: A bullish signal, the hammer consists of a down shadow that is longer than the body. Its peculiarity can be noticed as it resembles a hanging man.
6) Shooting Star: An opposite of hammers visually, this pattern occurs during or after an uptrend. These candles little to no shadow down.
7) Engulfing Candle: Used to represent both up and downtrends, bullish markets have a long white candle and up trending bearish markets have a long black candle. This makes them perfect for an overall Forex trading strategy.
8) Spinning Tops: Used to identify market changes as they appear, spinning tops are patterns where small bodies are formed. The shadows are much longer, and they indicate to both uptrend and downtrends.
A variety of such patterns exist for traders to choose from, and each one functions differently across varying timeframes and on different Forex trading strategies. While the freedom to employ is up to the trader, knowing where to is the key! Sign up with the world-class broker, WesternFX, and take your trades to the next level!
With our stellar brokerage guiding you, your career in Forex will see absolute excellence. Call us today to know more about Forex trading in Sri Lanka!
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