Candlestick Part II: Basic Patterns

By: Ramano Richie
Submitted: 2007-01-17 16:15:09
Print this article | Tell a friend | For publisher | Social Bookmarking
Rating:
 

A. Doji

Doji describes indecision market. There is no “real body” at this shape. The opening price is exactly the same with the closing price.

Doji is not a turning point in the market but it is the opportunity for the market to turn. It’s a moment of indecision where market is still confused by price direction.

B. Hammer and Hanging Man

Hammer and Hanging Man pattern have identical pattern. What makes them different is only where are they located at the chart. Hammer ends down trends which stop the down trends from going further. Meanwhile, Hanging Man ends up trends which stop the up trends from going further.

Both of them (hammer and hanging man) have two types of shape:

Hammer

Hammer with Empty Candlestick

There is buying pressure at the hammer candlestick which make the closing price is located above the opening price.

According to Munehisa Homma’s theory, this pattern would be followed by bullish pattern.

Hammer with Shaded Candlestick

But what happen when the hammer pattern is a shaded one (not an empty candlestick)? Well, there is still buying pressure at the period but not as strong as we’ve been discussed at the previous example. This time, the closing price is below the opening price.

According to Munehisa Homma’s theory, this pattern would be followed by bullish pattern but the angle is much shallower than the previous one.

Hanging Man

Hanging Man with Shaded Candlestick

There is selling pressure at the hanging man candlestick which make the closing price is located below the opening price.

According to Munehisa Homma’s theory, this pattern would be followed by bearish pattern.

Hanging Man with Empty Candlestick

But what happen when the hanging man pattern is an empty one (not a shaded candlestick)? Well, there is still selling pressure at the period but not as strong as we’ve been discussed at the previous example. This time, the closing price is above the opening price.

According to Munehisa Homma’s theory, this pattern would be followed by bearish pattern but the angle is much shallower than the previous one.

Click here to read more about this article.

=====================================

Richie is a forex trader and forex technical analyst.

You may read my articles at Forex Library and my daily technical analysis at my brother's blog: Brian Signal

Article source: Expert Articles

Most Recent Articles in Currency Trading category

  • The Truth About Forex Trading Softwares and Expert Advisors - By: Richard Golman
    This article attempts to show readers many experiences of the author using various expert advisors and automated forex trading systems.This, primarily is to assist readers to make a better and informed decision as regard purchase of highly profitable automated forex trading software. This article will therefore be of immense benefit to aspiring forex traders wishing to take his trading to a new pedestal.
  • How to Pick Optimized Automated Forex Trading Robots and Systems For Maximum Profitability - By: Richard Golman
    This article tries to illuminate the features necessary to look out for before forex traders buy automated trading software. There are many scam forex products out there, but this does not for once suggest there are no profitable ones too. The big question is, how do traders recognize good expert advisors? This is what this article endeavor to address. Read on...
  • Profit in Forex and Make More Money Using Proven Automated Trading Software - By: Richard Golman
    This article attempts to expose the mistakes many traders of the forex market make, and why such mistakes are the culprits responsible for often less-than-glamorous performance of many of these traders. By following the invaluable suggestions articulated in the article, readers will learn the most pertinent lesson in forex trading, what you don't have shouldn't be an obstacle to what you want to have.
  • An Understanding Of Forex Charts Is Essential To The Successful Trader - By: Donald Saunders
    For an increasing number of Forex traders charts are an essential tool in reaching trading decisions and a knowledge of Forex charting and technical analysis is now a fundamental part of any currency trading course.
  • 5 Reasons For Entering The Exciting World Of Currency Trading - By: Donald Saunders
    Currency (Forex) trading is extremely popular with small private investors around the world and this is not surprising when you look at the advantages which this lucrative form of investment provides.
  • Currency Trading Without A Clear Strategy Is The Road To Financial Ruin - By: Donald Saunders
    Many novices are enticed into Forex trading by the promise of high and low risk or risk free returns for a minimal investment and rush head first into trading without any clear plan. As we show here however, currency trading without a clear strategy can be a fast route to financial ruin.
  • A Good Forex Trading Course Is A Must For All Beginners - By: Donald Saunders
    If you are tempted to participate in the world's largest and most liquid financial market and share in the profits which more and more small investors are enjoying today then do not make the mistake of doing so without at least some basic training.
  • The Best Hours To Trade Forex - By: Donald Saunders
    If you are new to the world of forex trading then one question which you will surely be asking, and which we answer here, is just when is the best time of day to trade?
  • Forex Trading Software Is The Foundation Of Successful Trading - By: Donald Saunders
    At the very heart of any forex trader's toolbox is a forex trading software package and understanding the power of this package and choosing the right package is critical to any trader's success.
  • Simulated Forex Trading Can Save You A Fortune - By: Donald Saunders
    There is no better way to learn forex trading than to actually be able to sit at your computer and practice trading in the live environment, but this can be a very costly exercise. Today, however, the advent of forex trading simulators makes this both simple and safe.