In this video, we will look at the best candlestick patterns to profit in forex and indices. There are some important factors to look at before we have the look at the setups.
- There is a lot of disinformation out there.
- Trading is a business and should be treated as such.
- Do you own back testing — this is key to success.
- Understand that different markets and timeframes have their own personality.
- Don't just blindly trust what you are told. Examine the claims for yourself through back testing.
- If you look at any chart and any timeframe, and pick two candlesticks, which are next to one another, someone, somewhere, will claim that what you are looking at is the ultimate candlestick pattern.
- And finally, you must understand that you cannot simply trade off of candlestick patterns. You must have a confluence of traders, all aligning, before you enter a trade.
Bearish Pin Bar:
Pinbars are perhaps the most famous candlestick because they are very consistent. The tail should be at least two-thirds the length of the candle. The body should make up one-third. This pattern is found after a bullish move in the market.
Bullish Pin Bar:
This pattern is similar, but found after a bearish move. The nose should be relatively small and they are not doji bars. The tail should be two times the length of the body. This pattern indicates a bullish reversal.
Bullish Morning Star Setup:
The first candle is a long bearish candle, followed by a long tailed doji candle. This is followed by a strong bullish candle. After this pattern, the market reverses to the upside.
Bearish Morning Star Setup:
This pattern is similar, but it indicates a bearish reversal in the market.
Bullish Piercing Pattern:
First we have a strong bearish candle. The next candle gaps down and opens below the previous candle. This candle, then closes at least 50% into previous candle. This is a bullish reversal pattern.
Bullish Engulfing Pattern:
The bullish candle is larger than at least the previous 5 candles. It is said to engulf the previous candles. This is a bullish reversal pattern.
Bearish Engulfing Pattern:
This is the opposite of the bullish engulfing pattern and it is a bearish reversal pattern.