![]() The shadows of the small candle should be preferably short, and the body of the large candle should overpower the entire previous day’s candle. For a Bearish Engulfing Pattern, the situation is vice-versa. Bullish Engulfing Pattern is formed when a small ‘Red’ candlestick is followed by a large ‘Green’ candlestick that completely engulfs the previous day’s candle. It is two candle reversal pattern that is formed at the end of a downtrend or an uptrend. Either we can buy the forex pair to benefit from the uptrend that is about to begin, or we can look at buying ‘options’ to reduce risk. We generally will have two options after noticing this pattern. The second candle in the pattern must be bullish and should open below the low of the previous day and closing more than halfway into the previous day’s bearish candle. This pattern is typically seen at the end of a downtrend. The Piercing Pattern is a two candle reversal pattern that implies a possible reversal from downtrend to an uptrend. If we come across this pattern, we must wait for extra confirmation to take any action. The opposite is true in case of a downtrend. In the case of an uptrend, the bulls will be winning the battle, and the price goes higher, but after the appearance of Doji, the strength of the bulls is in doubt. The appearance of this pattern indicates a tug of war in which neither the bulls nor the bears are winning. ![]() A Doji represents the equilibrium between demand and supply. This pattern is formed from a single candle and is considered a neutral pattern. ![]() So we see a bullish candle on the charts immediately after the Hammer pattern, consider buying the currency pair. We must take trades only after the appearance of a confirmation candle and not before. That is a clear indication of the market reversal. As the candle comes to a close, the market recovers and closes near the unchanged mark or maybe a bit higher. On the day this pattern is formed, the market will be inclined towards the sell-side. The Hammer is mostly seen after a prolonged downtrend. It is a single candlestick pattern signaling a possible reversal to the upside. By referring to this guide, one can get the basic price-action structure of all these important patterns that are mentioned below. So, this article basically acts as a cheat sheet for any reference. ![]() Since it is not possible to cover each and every one of them, we have picked some of the most profitable and important patterns everyone should be aware of. But there are many more patterns that one needs to be aware of. In the previous lessons, we have discussed many candlestick patterns out of which some were single, some were multi-candlestick patterns (Dual & Triple). ![]()
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