Candlestick patterns are the main element of graphical display of price movement in the Forex market. Each of the elements of such a chart displays a certain range of price changes over a certain period of time.

The history of Japanese candlesticks in Forex

Any novice trader at the first stage of studying the Forex market will certainly ask the question: What are Japanese candlesticks and what is their essence?

The inventor of candles and candlestick analysis in general is the Japanese rice trader Munehisa Homma, who was engaged in trade in the 17th century. After him, many tried to invent something similar, but the attempts were in vain.

In his analysis, Munehis took into account not only the price, but also its changes, various psychological factors influencing traders, as well as what fears or passions took possession of them during the period. How did this happen at that time, because there were no such means of communication and telecommunications as in our time, and information had to be received quickly?

It's very simple - Munehisa placed heralds at a distance from his exchange, sending certain signals using flags, which allowed him to quickly respond to exchange events.

The merchant’s invention gave him the opportunity to achieve unprecedented and very significant results at that time. Munehisa could make at least 100 profitable trades in a row.

In the 19th century, Steve Nison drew attention to Japanese candles, and soon introduced this multifunctional invention to the entire Western world. And because It was he who brought new effective methods of analysis to this tool; Nison was called the king of Japanese candlesticks. In modern currency trading, it is perhaps one of the most effective types technical analysis used by many traders around the world. In addition, this analysis is relatively easy, which is why it has become so widespread.

Let us immediately note that candlestick models are both a chart and a method of analysis, as well as forecasting, which give amazing results.

This type of forecasting is considered the most poetic, because the names have peculiar names, for example, “clearance in the clouds”, “shooting star”, etc.

But in order to competently analyze candlestick patterns, you need to know what these Japanese candlesticks actually are and what special properties they have. To do this, three main postulates are considered: the color of the candle, the length of its body and its shadows.

A Japanese candlestick has a body that is exclusively white or black. The body of the candle is depicted as a rectangle, which can be large or small. The boundaries of these rectangles indicate the closing or opening price.

Japanese candlestick can be bullish when the closing price is higher than the opening price or bearish, when the closing price is lower than the opening price. In addition, candles differ in color - a bullish one has a white body, and a bearish one has a black body.

The shadows of candles are a continuation of their bodies, which look like thin lines. Candlestick shadows can be top or bottom, and indicate which direction in this moment The Forex market is moving. The ends of the shadows are the highs and lows in a certain time period.

Long lower candlestick shadows signal a bullish market trend, while long upper candlestick shadows indicate the beginning of a passive trend. But at the same time, it is necessary to take into account one important point – the candle body should be shorter than its shadow. The longer the shadow, the stronger the signal.

Candlestick patterns, their bodies, as well as the presence or absence of shadows, with a certain probability, can indicate a trend reversal, its continuation, and, of course, trend uncertainty. At the same time, both single candles and their more complex configurations can determine the direction of the trend.

Today we want to look at the most common candlestick reversal patterns, as well as trend continuation patterns observed in the Forex market.

A Japanese candlestick that has a cut top or cut bottom appears on the chart with either the upper or lower shadow missing. Such a candle during a decline indicates a bullish trend, and during a rise – a bearish one. These candles are reversal patterns, but require confirmation in the next session.

Inverted Hammer and Shooting Star candles

On the chart, the Inverted Hammer candle signals that a reversal at the bottom is about to occur, but requires confirmation in the next time frame in the form of a black candle or a candle with a white body.

When there is an uptrend, the Shooting Star candle is a bearish signal. She has a small body, located at the bottom of the session, with an absent or almost invisible lower shadow and a fairly long upper one.

Both of these candles are identical in shape (short bodies and long rising shadow) and provide a signal that the uptrend is ending. But at the same time, the “Shooting Star” is a strong position, located at the peak of a trend that is growing, and the “Inverted Hammer” is considered a weak position, in which the trend can either continue to rise or decline with equal probability. For this reason, to enter the market, you must wait until a candle confirming the trend appears.

Candles “Hammer” and “Hanging”

These are candlestick patterns that are the reverse of the previous patterns in configuration, i.e. the long shadow is under the short body (either black or white).

The Hammer candle is a strong position, usually placed at the bottom of a bearish trend and is a signal for its reversal.

At the market top, the opposite situation is formed, i.e. The Hanged Man candle has a weak position, and the continuation of the trend is interpreted ambiguously. In other words, the probability of a trend movement can equally continue in either direction, so confirmation is necessary, i.e. the appearance of a confirmation candle with a lower close.

Let us immediately note that in the types of candlestick patterns listed above, the main factor is the length of their shadows, and the color of the candlestick body itself does not matter much.

Candlestick patterns "Bearish" and "Bullish" engulfing

In these candlestick patterns, the first candle has a body size that is slightly less than half the size of the body of the second candle. In other words, the second candle seems to absorb the first candle with its size, while it has a clearly visible reverse trend and has barely noticeable short shadows. Both of these patterns are strong configurations and are indicators that the Forex market is more likely to continue in its current direction.

Candlestick formations: “Curtain of dark clouds” and similar “Clearing in the clouds”. There are situations when candles that are almost identical in size appear on the chart, but the second of them opens a little lower or a little higher than the first closed and has a pronounced opposite trend.

Such candlestick patterns also have a strong configuration and give a signal that the trend is likely to continue in the direction it has started. At the market top, such candlestick patterns are called “Dark Cloud Cover”, and at the market bottom – “Clear Clearance”. Often these models are called “absorption” configurations, but this is not correct, because the size of the bodies of the candles in question is almost identical.

Candlestick patterns “Harami at the top” and similar “Harami at the bottom”

The peculiarity of the Harami candlestick patterns is this: the body of the second candle is absorbed by the body of the first, i.e. the situation is opposite to the “Absorption” models. Let us immediately note that the color of the candle body in such models is not a determining factor, although it would be better if the first candle (in color) displays the current direction of the trend, and the second in color is opposite to the first. Such patterns are weak configurations that require the appearance of a confirmation candle.

The most important candlestick patterns are Doji (Doji) candlesticks. Such candles have the same price for both closing and opening. But at the same time they are considered in a certain combination. For example, a reversal pattern that is a strong signal is the Dragonfly Doji. For such a candle, its upper shadow is either completely absent or practically invisible. At the same time, the lower shadows are very long. Also included in the reversal pattern is the Tombstone Doji, a mirror image of the Dragonfly Doji.

Model "Long-legged Doji" observed during the opening of two sessions in a row with a gap up or down. Such a pattern at the tops indicates a reversal. There is a variation of this model called “Rickshaw”. It opens when the closing and opening prices are at the same distance from both the maximum and the minimum.

Japanese Marubozu candles are a type of candle that has no shadows at all, or they are very small in size. Such candles indicate to traders that the market movement will continue in the existing direction, whether up or down, it all depends on the existing trend (bullish/bearish).

Candlestick patterns “Tweezers” and “Crows”

A candlestick pattern such as “Tweezers” can be formed both at the market top and at its bottom. These models indicate a strong level of correction in the trend direction or the process of forming a new market trend, which will be in the opposite direction. Such models are essentially the appearance on the terminal chart of two candles that have (in an uptrend) the same maximums or (in a downward trend) minimums.

"Two Crows" are a rather specific model of Japanese candlesticks and can be found quite less often in comparison with other models. This figure also belongs to the reversal pattern and is based on working with a gap.

The model, as a rule, appears at the top, after a candle that has a long body (in principle, the gap comes from it), when, after a gap has occurred, a pair of candles are formed, which seem to rise above all the others and watch what is happening from above. But such situations in the Forex market do not last long, and after a short period of time the price begins to change direction and practically collapses.

Also included in the reversal pattern is the bullish “Three White Soldiers” pattern, which reflects a steady gradual increase in the closing price. Such a pattern appears on the chart in the form of three candles with white bodies with short shadows. The closing price of these candles is higher than the previous ones, and the opening price is located inside their body. This pattern may also indicate an exit from a sideways trend.

Models “3 days from the inside down” and the opposite “3 days from the inside up”

The first of the patterns is bearish and boils down to the Shooting Star pattern. This pattern is a strong configuration indicating a trend reversal when it is at lows.

The second pattern is bullish and comes down to the Hammer. In addition, this candlestick pattern confirms the Harami pattern and is also a strong configuration confirming a trend reversal, only with a location at the highs.

Candlestick patterns of trend reversal and continuation - our conclusions

Today we examined the most common and most frequently encountered candlestick formations and their interpretation and we can come to the conclusion that Japanese candlesticks in the Forex market are one of the most effective methods used in technical analysis, which have gained a significant reputation among traders and analysts around the world.

Due to the fact that candlestick patterns change currency quotes react much faster than other models market analysis, traders who know how to recognize them have the opportunity to more effectively and quickly determine the market trend.

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Candlestick patterns. Review and analysis

Good afternoon, dear readers! Andrey Mamontov is with you, we have the 2nd article in line about Japanese candlesticks for beginners. After reading it, you will receive popular Japanese candlestick models, with which you will improve your trading performance and learn to understand market dynamics. Today we’ll talk about Japanese candlesticks and combination analysis. In 1992, the foundation Quantum", under the leadership George Soros, the British pound collapsed. The day before this event (September 15), a clear candlestick pattern “ Bearish engulfing" Everyone who read this market signal was able to make money with Soros. The rest of the participants simply watched this well-planned financial manipulation.

11.05. 2017 year on the pound/dollar chart the situation repeats itself. I had already entered into a bearish trade, moved the position to a slight plus and next week I’m waiting for the candlestick pattern to work out “ Absorption model».

We will look at ten formations that, according to my personal rating, are considered the best. If you have your own option, I’ll be glad to test it. Illustrate your patterns in the comments below the article, and let's develop together.

What do you need to know before reading?

The first article in the series about Japanese candlesticks for beginners “” will help you fully understand the topic. With its help you will learn:

• how to read Japanese candlesticks and why it is possible to track the actions of large exchange players with their help;
• why you shouldn’t use short time intervals and trade only on assets with a high level of volatility.

Be sure to study the proposed material and only after that start choosing candlestick reversal patterns.

Additionally, it can help you. In addition, you will need. Below will be a series of articles that you can read in your free time.

Let's move on to a review of candlestick combinations.

Combinations

Hammer/Hanged Man

This is a single candle with a small body and a long lower tail. The appearance of this formation warns of proximity of a strong level, capable of stopping the current trend.

Model features

• The body is placed at the top;
• The lower shadow is at least twice as long as the body;
• The upper shadow is absent or has a small size;
• The body color of the figure is not taken into account during analysis.

Factors that enhance the formation

• Long shadow, 5 or more times the body size;
• Appearance of 2-3 hammers/hanged men in a row.

Note from Steve Nisson

The signal generated by the pattern " Hanged», needs further verification. You can do this using one of the following filters:

• the new candle should be black;
• The opening price of the new candle was lower than the closing price of the Hanged Man.

Model variations

These are weak candlestick patterns that require an indicator or other technical analysis tools to work with. Remember them and try not to use them in your trading.

Absorption

This is a powerful reversal signal that is formed by a combination of two contrasting candles. For a long time, this model could be used as an independent trading strategy.

Model features

• Several candles are always involved in the formation of a figure;
• The bodies of the candles of a given combination always have a different color;
• The first candle should completely dissolve in the body of the second.

Factors that enhance the formation

• The second body is 4 times larger than the first;
• The pattern was formed after a sharp impulse movement in the direction of growth or decline;
• Several bodies dissolved in the second candle.

My observations

Unfortunately, in 2017 the situation changed and the formation is no longer considered reliable. Here's why this happened:

1. On the history of graphics " Absorption» is worked out in about 70% of cases;
2. Due to its high accuracy, most beginners adopt this formation;
3. Major players have tracked this activity and now, with every obvious “ Absorption“Trying to work against the crowd.

Daily chart of the pair dollar/canadian dollar. All failed models are marked with a yellow rectangle " Takeovers": after their appearance, the market practically did not react or went against the expected forecast.

To avoid becoming a victim of market maker manipulation, I recommend using this combination only in combination with strong horizontal levels.

These are trend reversal candlestick patterns that reflect a sharp change in market sentiment. Very strong signal, which is worth taking a closer look at.

Model features

• This pattern is always formed by two candles;
• Candlestick bodies must have different colors;
• The second candle should close part of the body of the first candle.

Factors that enhance the formation

• The second candle covered more than 50% of the body of the first;
• With an upward trend, the second candle opened without an upward shadow, and with a downward trend, without a downward shadow;
• With an upward trend, the second candle closed below the resistance level, and with a downward trend, it closed above the support.

The "" pattern has sufficient strength and can be used as a separate trading strategy. To enhance signal accuracy, do the following:

1. Wait for this candle combination to appear;
2. In the middle of the second candle for the “Clouds” model, draw a horizontal level;
3. Place a pending buy or sell order in the marked area.

This maneuver will somewhat reduce the number of transactions carried out, but will significantly improve their quality.

Stars

This candlestick pattern displays gradual change in market sentiment: dominance of one side, turning point, interception of initiative and movement in the opposite direction.

Model features

• The pattern is always formed by three candles;
• The second candle consists of a short body and small shadows;
• The color of the second candle is not taken into account during combination analysis;
• The trailing candle should cover most of the body of the first candle.

Factors that enhance the formation

• The second candle has the shape " Dodge", that is, its opening and closing occurred at the same level;
• The second candle was not located at the same level as the first and third, but formed a price gap up or down;
• The third candle covered almost the entire body of the first.

I pay attention to " Stars"only when all three reinforcing factors are combined. The resulting formation is called "". If you combine it with strong horizontal levels, then the probability of signal processing increases to 70%.

" - enhanced version of patterns " morning Star" And " Evening Star».

Ricochet

These are very unusual reversal patterns that occur quite rarely and usually cause intervention major players or publishing unexpected economic forecasts.

Model features

• In an uptrend, three sequentially rising candles are formed, the bodies of which do not intersect with each other. During a downward trend, this rule is worked out in a mirror manner;
• The fourth candle opens with a gap and does not intersect with the body of the third candle;
• During a downtrend the fourth candle must meet two conditions: open above the closing point of the second candle and close above the opening point of the second candle;
• During an uptrend The fourth candle must meet two conditions: open below the close of the second candle and close below the open of the second candle.

For this model, there is no need to look for additional factors that enhance its significance. If you see a similar combination on the daily or weekly chart, I recommend immediately entering the trade at the market price. In most cases, for " Ricochet» should strong price momentum, where you can make good money.

This is an easily recognizable combination that appearance resemble a pregnant woman. Harami is considered an early signal that warns of imminent market instability. After this pattern appears, it is advisable take profit and, using indicators, expect new conditions to arise.

Model features

• Always consists of at least two candles;
• A large candle completely dissolves the second and all subsequent candles in its body;
• The trailing candle has a small body and short shadows. The color of this candle itself is not important and is not taken into account during the analysis.

Factors that enhance the formation

• The closing candle looks like “ Dodge" This formation is called " Harami cross"and usually occurs in the area of ​​strong price levels;
• More than 5 trailing candles have dissolved in the body of the mother candle;
• After the “” pattern appeared, a control candle appeared. During a downward movement it should be white, and during an uptrend it should be black.

These are two or more candles that formed equal price highs or lows within the same market period.

Model features

• The tweezers must consist of at least two candles;
• The group of candles participating in the combination must follow one after another;
• Each candle must exactly repeat the minimum/maximum of the previous one.

Factors that enhance the formation

The "" pattern becomes more significant if it is part of another reversal candlestick combination. Below you can see some examples of how this can happen.

My observations

" is an excellent model that tells traders location of significant horizontal level. I check this combination with indicator readings, and if the value is confirmed, I place pending limit orders at the minimum/maximum.

Candlestick capture refers to a large single candle that occurs in opposition to the current trend. This pattern should not be confused with “”, where two candles are approximately equal in size. " Capture" - This contrast candle, which is visually easy to determine on the graph.

Model features

• It is always one candle that appears against the trend;
• If the trend descending, then a white candlestick without a lower shadow should appear. If movement ascending, then you should expect a black candle with a cut off top;
• The pattern should open with a price gap, and the closing point will cover most of the previous candle.

Factors that enhance the formation

• « Capture"appeared after a prolonged unidirectional movement;
• Two large candles appeared in one price zone against the current trend (a “ Double grip»);
• After " Bullish takeover"The next candle turned out to be white, and after " bear grab" - black.

« Capture"is an aggressive pattern, after which you need to open a trade against the trend. This option is only suitable experienced traders who are able to competently control risk and find the optimal entry point.

These are two contrasting candles whose closing points are at the same price level, called “ balance line».

Model features

• Two oppositely colored candles with approximately the same body sizes were formed;
• The trailing candle always opens with a price gap that matches the main trend;
• The bodies of the candles participating in the combination do not overlap each other and always close at the same level point.

Factors that enhance the formation

• On the path of price movement a formation has formed round level with double or triple zero (1.1000, 1.2500);
• After the appearance of a new candle, the “” pattern turned into the “” formation;
• The next candle that appeared after " Bearish counterattack", closed under " balance line" For " Bullish counterattack"The new spark plug should settle above the " balance line».

to contents

Model features

• Three candles must follow each other and be painted the same color;
• Each subsequent candle must set a new price high/low;
• All three candles have approximately the same body size.

Be extremely careful

The pattern " Offensive"There is a variation called "". The appearance of this model indicates that there was temporary correction, and the old trend continues.

• « Bullish offensive" or " Three soldiers» - purchase (for "Three Methods"- sale);
• « Bear offensive" or " Three Crows» - sale (for "Three Methods"- purchase).

Working with the pattern " Offensive», always wait until the fourth candle closes. This simple action will slightly reduce the number of entries, but will protect you from the “” pattern and opening a trade against the trend.

Summary

Friends, have you studied 10 strongest candlestick combinations, which can help you make money today. Unfortunately, until you put this knowledge into practice, it will not be useful. To prevent this from happening, I recommend that you do the following:

1. Review the article again;
2. Make your own rating, in which rank all patterns on a scale from 1 to 10;
3. Leave the first three positions and cross out the rest;
4. Open a demo account and test the selected patterns. Best broker for trading stocks - an excellent broker for trading on Forex -;
5. Evaluate the result and leave for work only one candlestick formation that showed maximum result;
6. Proceed to trading on a real account;
7. Share examples of several successful transactions in the reviews below this article.

Thanks to all. I hope that the proposed material contained only information that was useful to you. Don't act like the hero of this meme

As always, it's all up to you. See you in new articles!

If you find an error in the text, please select a piece of text and click Ctrl+Enter. Thanks for helping my blog get better!

Collection of Japanese candlestick patterns

Forecasting further price movements can be done not only using various indicators, tools, theories and indicators, but also using a specific type of chart. For example, using the graph “ Japanese candles».

The Japanese candlestick chart was invented back in the 17th century by rice traders. Despite its age, this chart is still considered the most convenient for analysis.

And it’s not surprising, because it fully reflects the behavior of the asset price over a certain period. But what Japanese candlesticks are valued even more for is their figures.

Thanks to these figures or models, a trader can easily predict further price movements.

There are reversal Japanese candlestick patterns and continuation patterns. In this article we will describe candlestick patterns of trend reversal.

There are many reversal candlestick patterns. It is quite difficult to remember all the models. But this is not necessary.

To successfully trade binary options, it is enough to know the strongest candles - reversal patterns.

Let's consider them

• bullish and bearish engulfing;
• a curtain of dark clouds and a gap in the clouds;
• harami;
• harami cross;
• morning and evening star;
• morning and evening doji star;
• abandoned baby;
• hammer and hanged man;
• shooting star and inverted hammer;
• bullish and bearish belt grab;
• bullish and bearish counterattack;
• three black crows;
• two flying crows;
• flat top and base " pan»;
• top " tower" and base " tower»;
• three mountains and three rivers;
• three buddhas.

Most of these patterns are formed on the price chart underlying asset along with a break or gap.

Therefore, these patterns can mainly be found on charts of stocks or indices. You can also find them on currency pairs or commodities, but the time frame must be daily or weekly.

And so figures are formed on any timeframe.

Bullish and bearish engulfing

This figure consists of only two Japanese candlesticks and occurs after a certain trend - bullish or bearish. However, the trend is not necessarily long-term.

A chart pattern is formed when the body of the first candlestick is engulfed by the body of the second candlestick. In this case, the absorption of wicks (or shadows) is not necessary and the color of the second candle is also not necessary.

The condition that confirms a bullish or bearish engulfing pattern is increased volume on the second candle relative to the first.

Also note that bearish engulfing is a change from an upward trend to a downward one, while a bullish engulfing is a change from a downward trend to an upward one.

A curtain of dark clouds and a gap in the clouds

A dark cloud cover is a change from an uptrend to a downtrend. The figure, as in the first case, consists of two Japanese candlesticks and is somewhat reminiscent of a bearish engulfing pattern.

Conditions for the emergence of the model

• Candles are different colors. The first closes in a bullish direction (usually a green or white candle), the second closes in a bearish direction (a red or black candle).
• The body of the second candle must cover the body of the first candle by at least half.
• Both candles formed without shadows or with very small shadows.
• The closing price of the second candle is very close to the opening price of the first candle.
• The opening price of the second candle is higher than the closing price of the first candle, that is, a gap has formed.
• The volume on the second candle was significantly larger than the volume on the first candle.

As for a break in the clouds, the pattern is formed when a downward trend changes to an uptrend. The conditions for the emergence of the model are similar, but taking into account the trend.

Harami

Harami is a pattern of two Japanese candlesticks, which is the opposite of bullish or bearish engulfing. That is, the first candle completely engulfs the second candle.

As with absorption, the color of the candles and the length of the wicks do not matter.

The harami figure appears quite rarely, but it is quite reliable, as it clearly warns the trader about the uneven development of the market trend.

Harami cross

An even rarer figure than the harami. At the same time, the harami cross is a variation of the above-described model. The difference from a regular harami is the shape of the second candle, which does not have a body.

This candle is called a doji. It occurs when the opening price coincides with the closing price of the period under review. A candlestick shows market uncertainty and increases the chances of a sharp trend change.

This model is also called a figure of terror. This is because the figure almost always works.

Morning and evening star

The morning star is a pattern of three Japanese candlesticks that signals a change from a downward trend to an uptrend. The first candle of this pattern is bearish (red or black) with a fairly large body.

Then a candle with no body or with a very small body follows with a gap. The color of the second candle does not matter. The second candle signals the bears' loss of strength.

And the last, third candle should be bullish (green or white) with a fairly large body, which should cover most of the first, bearish candle.

It is the final form of the model and indicates a change in the trend and a gain in bullish strength.

Accordingly, the evening star is a reversal candlestick pattern, signaling a change from a bearish trend to a bullish one. The figure is similar to the morning star adjusted for trend.

The signal about a change in trend in these figures is stronger, the larger the gap between the central candle and the other two.

Roughly speaking, the higher the star, the more obvious the reversal pattern. Increased volume on the third candle can also confirm guesses about the formation of a reversal pattern.

Morning and Evening Doji Star

These figures are similar to the morning and evening stars discussed above, but with a slight difference - the central candle does not have a body. The Doji strengthens the reversal signal, so the morning and evening Doji star are more reliable candlestick reversal patterns.

Abandoned baby

The abandoned baby is a variation of the morning and evening doji star.

The only thing that distinguishes this model from the one discussed above is the presence of large gaps between the central candle and the other two candles.

This pattern appears very rarely on charts. But when it appears, it works flawlessly.

Hammer and Hanged Man

If at the end of a downtrend a Japanese candlestick is formed with a long lower shadow, a small body relative to the shadow and no upper wick or at least a very small wick, then we can safely say that a hammer has formed.

Yes, the model consists of one candle, so it is not as reliable as, for example, harami, but it is quite common.

Accordingly, the hanging man is the final candle of an uptrend and is the reverse of a hammer formation.

In both cases, the color of the candle does not matter, however, the color of the hammer or hanging man, which is the opposite of their trend, is considered stronger.

Shooting Star and Inverted Hammer

A shooting star is formed during an uptrend and indicates a loss of bullish strength. The model is a Japanese candlestick with a long upper shadow and a small body without a lower wick. That is, a shooting star is an inverted hanged man.

An inverted hammer tells the trader that the bears are losing strength and the bulls are gaining strength. Characterized by a long upper shadow and a small body without a lower wick.

As with most patterns, the color of the shooting star or inverted hammer candlestick does not matter.

Bullish and bearish belt grab

A bullish belt grab can resemble a bullish engulfing. But there is one peculiarity.

In a bear market, the opening of the bullish capture is the minimum price of the period in question, and the closing price is much higher than the opening price.

That is, the candle does not have a lower tail and has a very voluminous body. This model is also called “ candle with cut base».

The bear grab for the belt appears in a similar way.

In an uptrend, a bearish candle appears, the opening price of which is the high, and the closing price is much lower than the opening price. The figure is also called " candle with cut off top».

Bullish and bearish counterattack

A bearish counterattack resembles a curtain of dark clouds.

That is, the figure also consists of two Japanese candles of different colors and is formed in an uptrend, but the closing price of the second candle is equal to the closing price of the first candle.

Thus, there is no overlap of candle bodies with each other. This pattern is considered weaker than the dark cloud curtain.

A bullish counterattack is similar to a break in the clouds, but the closing price of the bullish candle is equal to the closing price of the bearish candle. Also, this figure is weaker than the gap in the clouds.

As you can understand, in both cases the opening of the second candle is formed with a gap, since the opening price of the second candle does not coincide with the closing price of the first candle.

Three black crows

Model " three black crows", as you might guess, consists of three candles. This figure signals a change from a bullish trend to a bearish one.

The conditions for the emergence of the model are as follows

• three consecutive bearish candles (red or black) appeared;
• the closing price of each such candle is lower than the closing price of the previous candle;
• The opening price of each such candle is at the level of the body of the previous candle.

If all these conditions are met, traders predict a further fall in the price of the asset.

Two flying crows

Two flying crows, like three black crows, indicate a change from an upward trend to a downward trend.

The pattern consists of two consecutive bearish candles (red or black), the second of which engulfs the body of the previous candle.

In this case, the opening price of the second candle is higher than the closing price of the first, plus the closing price of the second is lower than the closing price of the first.

Flat top and base " pan»

A flat top is formed during an uptrend and consists of several short-bodied candles.

The final touch of the pattern is the formation of a bearish candle with a large downward gap from the series of other candles.

The gap in this model is a mandatory and necessary condition for the formation of the model.

Base " pan” appears in a bear market. The form is the same - a series of short-bodied candles, after which a bullish candle is formed with an upward gap from the rest of the candles.

Top " tower" and base " tower»

Top " tower" is entirely based on the appearance of one or more long-bodied bearish candles that appear after several short-bodied bullish candles.

The opposite figure is the base " tower» – after several short bearish candles, one or more long bullish candles appear.

Three mountains and three rivers

Three mountains signals the end of an uptrend, and three mountains signal the end of a downtrend. The figures are successively formed by three equal peaks or bottoms - three mountains or three rivers.

This model is more long-term than the previously considered figures. In the West, these models are more common as " Three Peaks" or " Three bottoms».

We examined these figures in more detail in the article “ Reversal figures»

Three Buddhas

Three Buddhas are an analogue of the common Western reversal pattern " Head and shoulders" These are three peaks, the central one is higher than the side ones, and the two side ones are approximately at the same level.

« Head and shoulders"We also discussed in the article" Reversal figures»

Bottom line

As you can see, there are a huge number of reversal patterns that can be caught on both short-term and long-term timeframes and applied to any underlying assets.

Candlestick reversal patterns can be used as a separate trading strategy to earn money binary options, and to confirm other, more complex strategies.

Candlestick patterns in trading are one of the most widely used and accessible methods of indicator-free market analysis. Candlestick patterns work equally well both on different time periods and on the charts of different instruments. And now, about all this in more detail.

Candlestick patterns in trading

The candlestick structure is built on the basis of four market components - the opening/closing price and two local extremes (maximum/minimum) reached by the price during the period of its formation. These 4 factors form the body of the candle and its shadow (Fig. below). The white body (not filled) of the candle indicates that the closing price of the time period was higher than the opening price and, conversely, the black body (filled) of the candle indicates that the price of the analyzed instrument for the selected period fell below its opening price.

The main advantage of this method of technical analysis is that candlestick analysis patterns allow a trader to quite accurately visually determine the state of the market at a particular point in time and show who prevails in the market - buyers or sellers.

When analyzing candlestick chart take into account not only the sizes of the body and shadows of candles, but also their combinations ( candlestick patterns). It is the combinations of candlestick figures that need to be given special attention, since they are highly likely to indicate upcoming changes in the market. Exists a large number of patterns that can be divided into two groups: one of which includes trend reversal patterns, the other - its continuation. Therefore, for successful analysis, a trader needs good skills in identifying and analyzing combinations of candles.

Within the framework of a short article, it is not possible to characterize each of the reversal patterns, so we will focus only on their general characteristics.

Formed on a downward trend movement. There are quite a lot of such figures; below, the figure shows the main ones.

Formed on an upward trend. Below are the main ones.

Analysis of a candlestick pattern should include an analysis of each candlestick and the entire pattern, the fundamental and psychological processes of its formation and, very importantly, the graphical context.

Candlestick analysis patterns - main mistakes

The main mistake traders make is to consider the appearance of a candlestick pattern on the chart as a trading signal. It should be clearly understood that the candlestick pattern itself is not a trading signal and does not determine entry points into trading position. It only gives an idea of ​​the current market mood and possible changes. Reversal candlestick patterns, in essence, warn the trader about a possible change in the trend to the opposite, or about the market going flat, or simply about a sharp slowdown in the trend if it continues to persist;

The reliability of Japanese candlestick signals is directly proportional to the time period chosen for analysis. As it decreases, the reliability of the signals decreases, so pattern analysis is recommended to be used on time frames of at least one hour, and preferably on even higher time periods;

When analyzing reversal patterns it is necessary to take into account that:

• The longer and steeper the market trend, the stronger the signal;
• The value of the pattern increases sharply when it forms near a significant level;
• Signals of 1–2 candlestick patterns are more significant when they are formed in the direction of the existing trend;
• A pattern loses its meaning if this pattern appears repeatedly on an existing movement and is not worked out. This especially applies to patterns containing dojis.
• It is important to take into account the vertical volume traded on the emerging pattern - the larger it is, the more significant the signal;
• Be sure to correlate the formation of the pattern with fundamental market data and the psychology of their formation; take into account the previous graphic background.
• In the market, in most cases, the structure of the emerging pattern is not classical, so you need to be attentive to their interpretation. In addition, when identifying them, there is a certain degree of subjectivity.

As already noted, candlestick patterns in trading are not an absolutely reliable analysis tool, so they must be confirmed by other technical tools (indicators, volume, other graphic figures). Therefore, if you notice a formed pattern near a strong level, analyze the market situation and understand the factors influencing its appearance.

A trend reversal is a change in the direction of price movement. What candlestick analysis patterns can be indicators of a trend reversal? Let's look at Japanese candlesticks that form reversal combinations: hammer and hanging man, morning and evening star, engulfing, harami and others.

To understand this material better, we recommend that you remember what types of Japanese candles exist.

Reversal patterns make it possible to predict a change in trend in the market with a high probability. In this lesson we will look at 5 figures that appear on charts most often. They can be used both when turning upwards and when turning downwards.

Hammer/Shooting Star - Reversal Pattern

The pattern consists of a single candle with a narrow body and a long shadow in the direction of the main trend (this can be a doji or a spinning top). It shows that the market is “exhausted”. A reversal is confirmed only when the pattern is followed by a candle of a color opposite to the trend.

"Hammer"- a pattern of price reversal upward after a downtrend. The price seemed to bounce off the anvil. The color of the candle is not fundamentally important, but the green one gives a stronger signal. Pay attention to the green candle following the hammer - only buy when it is formed.

"Falling star"- a pattern of price reversal downwards after a growing trend. The color is not fundamentally important, but the signal from the red candle is stronger. Wait for the confirming red candle after the pattern and only then sell.

Inverted Hammer / Hanged Man - reversal figure

These patterns also consist of a single candle with a narrow body, but here the long shadow is against the main trend. The logic of these formations is simple: we observed an aggressive attempt to reverse the price, but the attempt was stopped and the price rolled back to the opening price. However, this was just a pathetic defense, not an attack: it was not possible to continue the trend. We wait for the next confirmation candle and enter the market against the trend.

"Inverted Hammer" Buyers tried to push the price upward, and then sellers returned to the game. However, they were unable to push the price below the closing level - which means everyone who wanted to sell had already done so. Buyers will soon be back in the game.

"Hanged"- mirror model. Sellers tried to turn the price down, but buyers returned to the market. Despite all attempts, they were unable to continue upward.

Morning Star/Evening Star pattern - reversal pattern

"Morning Star"- model of three candles. The first candle is a long red one. Following it, a second, small candle (often a top or doji) opens with a gap down. The third green candle opens with a gap upward and closes above the opening price of the first red one. Customers are now in charge.

"Evening Star"- mirror model. The first candle is a long green one. The second small candle opens with a gap upward. The third red candle opens with a gap down and closes below the opening price of the first green one. The sellers won.

Absorption - reversal pattern

“Absorption” is a pattern of two candles. The body of the second candle completely overlaps the body of the first. Let's take a closer look at the bullish and bearish models.

“Bullish Engulfing”. The first candle is red. The second (green) candle opens below the closing price of the first candle and closes above its opening price. The bulls defeated the bears.

“Bearish Engulfing”. The first candle is green. The second (red) candle opens above the closing price of the first candle and closes below its opening price. The sellers won this battle.

Harami - reversal pattern

“Harami” is translated from Japanese as “pregnant”. The first candle is “mother”, the second is “child”. Let's consider the model on a bullish and bearish trend.

“Bull Harami” consists of two candles. The body of the second green candle is inside the body of the first red candle. A buy signal is confirmed when the harami is followed by a long green candle.

“Bear Harami”. The body of the second red candle is inside the body of the first green one. A sell signal is confirmed when the harami is followed by a long red candle.

*A reversal pattern following a long or steep trend provides a more reliable signal. In addition, the formation of a model important level support or resistance also increases the likelihood of its working out.

We talked about trend continuation models in the next article. This is important because without knowing the difference, you may confuse these similar putters and make a mistake!