There are literally scores of different candlestick patterns out there that are meant to help you interpret where a currency’s price is headed. There are a few simple ones, however, that will make your life a lot easier if you can memorize them. Many of these essential patterns consist of a single candlestick, which is a lot easier to spot than a whole group of candlesticks.

Single candlesticks can be very revealing, even if they are only representative of a single trading session. The Hanging Man is one of the easiest to spot. This candlestick has a small body that ended slightly down, but a dramatic low from which traders backed away from before the closing of that particular session. This is a bearish reversal pattern that occurs at the top of a resistance level. It is a strong indicator that prices are about to plummet. Its long low shadow indicates that consumer sentiment has taken a turn for the worse.

The Hammer is much like the Hanging Man, only it is a bullish indicator. The Hammer again has a small body, but this time, it has ended up for the session. The low price is dramatic, but because it ended up for the session, it is an indicator that prices are about to increase for the given currency.

A third single candlestick indicator is the Shooting Star. This pattern is the opposite of the Hammer and the Hanging Man; it has a small body that ends slightly up for the session, but has a very dramatic high point that it ended up reversing on. The Shooting Star occurs at the top of an uptrend and can be a strong indicator that prices are about to come down once again.

• «Previous Post
• Next Post »

---