Monday, August 27, 2012

Technical Analysis: Top 4 Bullish Candlestick patterns

The candlestick charts in both Forex and stock trading are very important to indentify the patterns and give you more information than the simple bar charts. I will introduce here 5 bullish candlestick patterns that are the most reliable and worth using in forex trading and stock trading.
I will also add the probability that the bullish reversal occurs, so you will have an idea of your chance of success if you identify the patterns correctly.
As we said previously, your technical analysis must not rely on a single indicator, therefore I highly recommend you to look at  the other technical indicators for forex and stock trading we introduced earlier.
You will also have to identifiy the pattern and see if it occurs on different time-frame, let's say that you found a pattern on a 4 hour chart, check if the same patterns is on the hourly chart, that little advice will increase significantly your chance of success.

Bullish Candlestick Patterns: Those patterns will help you to find out the end to a declining trend in forex trading or stock trading, and the starting point for a bullish trend.

1) Bullish Engulfing Pattern: Bullish reversal occurs 63% of the time:
Bullish engulfing pattern, technical analysis, forex trading

How to Find it:
-The candle 1 is bearish
-The candle 2 is bullish and "engulf" the size of the candle 1

-The market was downtrend til now

-Confirm with other indicators and high volume.

2)Morning Star Pattern: Bullish reversal occurs 78% of the time:
Morning star, bullish pattern technical analysis

How to find it:
-The first candle is a long blak candlestick
-The second is gapping down and stays within a short range
-The third candle is white and has wider range thant the 2nd one

-The market was downtrend til now

-VERY HIGH PROBABILITY that the bullish reversal occurs

3)Hammer : Bullish reversal occurs 60% of the time

Hammer candlestick, technical analysis, bullish pattern
How to find it:
-The candle body is  black  and less than 1/3 of the whole range,
-The body is at the top (looks like a hammer) and closes at its opening.
-The chart is downtrend

4) Three white soldiers: Bullish reversal occurs 82% of the time
three white soldiers, technical analysis, bullish patternHow to find it:
-Can clearly see 3 white candles, each closing higher than the previous one.
-Each candle close near or at its range
-The market was downtrend before that
-the opening of the new candle is within the body of the previous candlestick

VERY HIGH PROBABILITY of bullish reversal 


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