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10 Candlestick Price Action Signals You Can’t Ignore 

 September 26, 2022

By  ForexStrategiesWork.com

While candlestick price action is relatively easy to learn, it can take some time to master it well enough that you can trade successfully with it consistently. The key to doing this is to make sure you pay attention to what the candlestick patterns are saying. While there are dozens of candlestick price action signals out there, many are not worth your while and will end up confusing more than they help if you trade them without knowing why they work the way they do and how they should be used in the context of the bigger picture.

1) Bullish Engulfing

Bullish Engulfing is a bullish reversal pattern where the second candlestick completely engulfs the first, meaning it should be at least twice as big. This pattern indicates that the selling pressure has been exhausted and gives a signal to buy. The chart below illustrates a Bullish Engulfing Pattern. Notice that there are two red candlesticks in this chart, with one being much taller than the other.

2) Piercing Line

A piercing line (also called a bullish piercing line) is the opposite of a bearish engulfing pattern. Like a bearish engulfing pattern, it’s created by an upside candlestick that closes near the top and then follows up with a downside candlestick that opens above the previous day’s opening price, but closes at or below its open. Unlike an engulfing pattern, this one doesn’t have to be as deep.

3) Dark Cloud Cover

The Dark Cloud Cover candlestick pattern is a bearish reversal signal. It’s formed when the opening price is higher than the previous day’s closing price and then there is a gap down on the second day. This signals that bulls were exhausted and bears took over.

4) Hammer

Candlestick price action trading is a popular form of technical analysis that involves using patterns in stock price movements to predict how prices will move. Some of the most popular candlesticks are the hammer and the shooting star because they both show potential buying opportunities. However, it’s important to remember that there are many other candlesticks that can help you identify buying and selling opportunities, so be sure to check out our glossary of candlesticks for more.

5) Dark Cloud Cover Doji Star (Belt Hold)

The Dark Cloud Cover Doji Star (Belt Hold) candlestick pattern is a bearish reversal signal. It is sometimes referred to as the Omen or Falling Three Method. The pattern consists of three consecutive candlesticks. The first candle has a small real body, but it does not have a long upper shadow. This is followed by two candles with small real bodies, which have long upper shadows and are dark in color.

6) Shooting Star

A Shooting Star is a bearish candlestick pattern. It occurs when prices open at a high and then close at a much lower price point, with the lower close being below the body of the candle. This is an indication that the bears have gained control of the market and are likely to continue to do so.

7) Three Inside Up and Down (Twin Peaks)

The inside up and down pattern, also known as the twin peaks, is a bearish signal. It looks like two single peaks that are overlapping each other, where one peak is above the other. This pattern can be found when prices are rising or falling. The price of a security usually goes up before it starts to fall, and vice versa.
Inside up and down patterns can be found during any time of day or night on your chart.

8) Upside Gap Two Crows

The Upside Gap Two Crows is one of the most powerful signals in the world of technical analysis. This signal can predict a huge reversal and occurs when there is an upside gap followed by two long black candlesticks. It’s not unusual to see prices go down 20-40% after this signal, so it should be taken seriously when it appears on your charts.

9) Dragonfly Doji

This candlestick pattern indicates a brief pause in the current trend. The doji’s body is small and the opening and closing prices are near each other. It often appears at the end of an uptrend or before a downward trend. It can also be found within a downtrend, indicating consolidation after strong volatility.

10) Rising Three Methods

The rising three methods is a candlestick pattern that typically has three candlesticks. The first and second candlesticks should be bullish, while the third one should be bearish. In order for this pattern to work, the long candlesticks need to open higher than their close from the day before and close at or near their highs. The third (and last) candle must open lower than its previous close and then close at or near its lows.


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