Being an online forex trader is hard especially when there is a myriad of strategies, methods, and options out there. One of the most popular ways of searching for trading opportunities is to look for candlestick patterns. The problem arises when we consider that there are more than 30 candlesticks that you can encounter while trading forex. Instantly recognizing them in a real-time trading environment can be a difficult task to accomplish when you’re just starting your trading journey.
To help narrow the choices down and assist you in instantly recognizing these patterns in real-time, preparing candlestick patterns cheat sheet is very helpful. This article will tell you what to include in a candlestick cheat sheet.
Candlestick Patterns Explained
Candlestick charts are more useful because of their simplicity and ease of analysis. You can easily identify whether a candle was a sell candle or buy a candle and its high and lows during a season. Compared to other charts, candlesticks provide a more accurate representation of the strength of the market, serving as a prime indicator of where the market could eventually go.
The above is a Japanese Candlesticks with High, Low, Open, and Close price points.
- High- Highest price during the trading session.
- Low- Lowest price during the trading session
- Open- The point at which the session opens. It’s at the top of the body in case of a bearish candle and at the bottom of the body in case of a bullish candle
- Close- The point at which the trading session ends. It appears at the bottom of the body in case of a bearish candle and at the top of the body in case of bullish candle.
Different Segments Of A Candlestick Pattern Cheat Sheet
The candlestick cheat sheet is divided into four categories, namely, Bullish, Bearish, Reversal, and Continuation.
- Bearish Candlestick Patterns: As a trader, you should not have a preference for when the market goes down or up and should constantly look for new opportunities. Bearish candlesticks can help you quickly identify bearish momentum and spring into action.
Examples: Hanging man, Bearish Piercing Line, Evening Star, Upside Gap Two Crows, etc.
- Bullish Candlestick Patterns: Bullish candlesticks can be a signal of the market moving towards a bullish direction. These are effective patterns to use as with their help, you can quickly adjust your trading ideas, to either reverse or continue your trading bias. The hammer and bullish engulfing patterns are those most recognizable ones you can focus on.
- Reversal Candlestick Patterns: There are reversal patterns among both the bullish and bearish candlestick patterns. Preparing the cheat sheet in this way can help you see the potential exit and entry points for a trade. Using reversal patterns can allow you to either enter from the other side, or lock in the profits. Reversal Candle Patterns include the following patterns:
- Hanging Man
- Bullish/Bearish engulfing
- Piercing Line
- Dark Cloud
- Shooting Star
- Inverted Hammer
- Bullish/Bearish kicking
- Morning star, Evening star,
- Stick sandwich
- Morning Doji star
- Evening Doji star
- Bearish or Bullish Harami candlestick
- Advanced Block
- Bearish Breakaway
- Dumping Top
- Bullish or Bearish belt hold
- Three white soldiers
- Upside gap two crows
- Three black crows
- Bullish or Bearish Meeting Line
- Tower Top
- Tower Bottom
- Frypat Bottom
- Three stars in the south
- Bearish or Bullish engulfing cross
- Dumping top
- Continuation Candlestick Patterns: Candlesticks can also identify markets when they’re continuing with their trend in addition to reversal. You can use continuation candlestick patterns to do the following:
- Add to your current trading position. This increases your trading size and helps you take advantage of the trend.
- Exit a trade for profit
- Realize a loss in the case the trend is going against you
- Help you to enter in a trend that you may have earlier missed
Continuation candlestick patterns include the following patterns:
- Bullish or Bearish Separating lines
- Thrusting Line
- Bullish or Bearish Mat Hold
- Bullish or Bearish Three-line strike
- Bearish or Bullish side by side
- White lines
- Upside or Downside Tasuki Gap
- Rising or Falling three methods
Having a candlestick cheat sheet comes in handy for a trader as it presents a visual aid that will help them identify and deal with these price action patterns.