If you can spot these candlestick trend reversal patterns accurately, you can become a highly successful trader. A candlestick body is formed with the opening and closing price of the stock,security or the currency pair and the wick is formed by the opening and the closing price. By taking a look at the candlestick charts, you can quickly judge the mood of the market whether the bulls are prevailing or the bears are prevailing! One such candlestick trend reversal pattern is the Hammer! Master Candlestick Charting with this 82 page FREE PDF Candlestick Guide! Learn this powerful Fibonacci Retracement method FREE that pulls 500+ pips per trade. Discover Forex Mastery 2.0 System and watch this shocking M3 Forex Software video that shows it predicting the DOW JONES crumble days before it actually happened!
A Hammer represents the bottom of the trend. It occurs at the end of the downtrend. Hammers have small bodies and long shadows. Hammers have infact long lower shadow and a small upper shadow. What a hammer reveals is that after the price of the security opened on the market, sellers drove it down further. By the end of the day, buyers have recouped much of their losses to end the day near or at the high. No Hammer is complete without confirmation. If the price action directly after the Hammer is down, no hammer has taken place. A true Hammer cannot have its low violated by subsequent price action. Volume should also be taken into account. If the volume is heavy, the Hammer formed is genuine.
Bullish and Bearish Engulfing Patterns are another candlestick trend reversal patterns. A Bullish Engulfing Pattern is formed when a candlestick bar opens lower than the previous candlestick’s close and closes higher than the previous candlestick’s open. In simple terms, the candlestick body engulfs the previous candlestick’s body. Why is this pattern bullish? It represents a major defeat for the bears. Bullish Engulfing patterns are highly accurate but if the subsequent price trades below them than the pattern failed.
In the last decade use of candlestick patterns have become highly popular among the traders. These candlestick patterns are just a few of the many that can be used in confirming a change in the price action. Combining technical indicators with these candlestick patterns can be very powerful .
