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Trend Changing Candle Arrangements

By 07/18/2013 No Comments

Trend changing candle sticks on a chart can indicate a new buy or sell signal. While candle arrangements in real life create a mood-setting tone for parties or for your table, candle arrangements in the online financial markets such as forex can give you a deeper understanding of the tone of the market.

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Trend Changing Candle Arrangements

When candles of different shapes are arranged in a certain way on the chart, they can indicate the next movement of the currency pair. They can be either bullish reversal or bearish reversal indications. Together with chart patterns, candlestick patterns can give us more accurate signals of the next price action.

The arrangement of candles on the charts can often times be a signal for a trend change AKA reversal. There are two types of trend reversal candlestick patterns:

Bullish Reversal: Changing from a down-trend to an up-trend. It could be a good time to be bullish, and buy (go long) the currency pair.

Bearish Reversal: Changing from an up-trend to down-trend. It could be a good time to be bearish and sell (go short) the currency pair.

Below is the list of some of the most famous bullish reversal candle patterns:

– Morning star

– Bullish engulfing

– Hammer

– Bullish harami

For example, a bullish engulfing candle pattern is made up of two candles. The first candle is short and bearish, and the second one is long and bullish—long enough to be able to completely cover, swallow, or “engulf” the entire previous candle!

Trend Changing Candle Sticks - Bullish Engulfing Trend Changing Candle Sticks – Bullish Engulfing

And here is a list of some of the most famous bearish reversal candle arrangements.

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– Evening star

– Shooting star

– Hanging man

– Bearish engulfing

– Bearish harami

A bearish reversal pattern happens during an uptrend and indicates that the trend may reverse and the price may start falling.

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