5 Most Profitable Candlestick Patterns In FOREX

Now, let’s learn about some more interesting patterns when it comes to candlesticks – and patterns that could help you learn more about what’s happening, and as you can probably guess – the more you know, the more money you can make.

 

Spinning Top:

A spinning top is a Japanese candlestick with a long upper shadow, a long lower shadow, and small real bodies.  This indicates that there is some real indecision between buyers and sellers, supply and demand.

 

Let’s examine this, step by step.

 

First and foremost, the small real body (no matter whether it’s hollow or filled) shows that there is little movement from the open to the close.  This shows a real actual fight between bulls and bears, but not one where there was a clear winner, necessarily.  

 

The session opened and closed, and the price action doesn’t indicate volatility, as much as a real actual fight between supply and demand.  It indicates a bit of a “standoff”, where neither bulls or bears really achieved any meaningful price action.  

 

Now, we can deduce a couple of things from a spinning top, but it depends on the context.  If there is a clear uptrend, and a spinning top occurs, this might indicate a reversal.  All of a sudden, the bears are putting up more of a fight, whereas before, the bulls were in control, and the trend was clear – the price is moving up.

 

This also means the same thing when it comes to a downtrend.  In a downtrend, the bears are in control, and there Is extreme selling pressure – but a spinning top would indicate that bulls are fighting back, and the price might finally be ready to move back upwards.

 

Marubozu:

 

No, Marubozu is not the name of an anime character or a samurai villain, even though it’s a fun word to say. 

 

In fact, a Marubozu candlestick is unique because it actually means that there is are no shadows in the bodies of the candlestick.

This means that the high – or low – is the SAME as the open or close of the price, and of course – this depends on whether the candlestick is hollow or fill.  Check out two examples below.

 

A white Marubozu is a bullish candle.  Why Is this, you might ask? Well, the open price was the low price of the session, and it closed at the high!  It is obviously bullish when the highest price is the price that it finally reached at the end of the session.  It often indicates the possibility of a “continuation”, where the price continues to move up.

 

A black Marubozu is just as bearish as a whit Marubozu is bullish – and if you are long, this is very bad news.  It means that the highest price was the price at the open, and sellers took control to the point where buyers never got it back over that point during the session at ALL.  This certainly shows that sellers are strong here, and could mean that it’s time for you to protect your money and accept any losses/take profit before the tide changes.

 

Doji:

 

Doji candlesticks have very small bodies, and they have the SAME open and close price.  Interesting, right?  The same way that a spinning top indicates a fight, a doji is a clear fight between bulls and bears.

 

For those who might far this to remember, think of dojo – where those in martial arts train to fight.  One letter away is “doji”, and it indicates a fight.  Both buyers and sellers are trying to gain control here, and the result was a draw.

 

There are four different types of Doji candlesticks that you should try to remember, which shouldn’t be hard once you regularly see them and get used to things.

 

The length of the upper and lower shadows can vary – and it can still be a doji, so keep this in mind when trying to identify one.  For those who aren’t used to it, dojis often look like a cross, or plus sign.  Also – the plural form of doji….is doji.  This is important to remember when you see the term, so you could know the meaning in context.

 

Forex Candlestick Pattern: Doji

Whenever you see doji, it’s important to know exactly what is happening, and you do this by looking immediately at the preceding candlesticks.  The more context and information that you have, the more informed of a trade that you can make.

 

If a Doji forms after a series of candlesticks with long hollow bodies (like white Marubuzo candles) – this might not be the best sign if you are long, because it might mean that buyers are finally getting exhausted.  They have been in control for a while now, and suddenly, it seems as though the bears are putting up a fight (remember the dojo -doji connection).  Price can only keep rising if there is more buying, but if buying pressure isn’t there – the price drops.  That certainly might be what is happening in this situation.

 

Forex Candlestick Pattern: Long White Candle and Doji

 

Now, if a Doji occurs after a series of candlesticks with long filled bodies, such as black Marubuzos – can you guess what this means?  Yes, this actually means that sellers are getting tired.  For a price to continue to go down, there needs to be selling pressure, but the doji indicates that the bulls are fighting back, and seeing an opportunity in the price, believing that it can finally back move upwards again.

 

Forex Candlestick Pattern: Long Black Candle and Doji

 

Of course, for some, they might want to wait for confirmation by checking to see if there is a long white candle after this kind of price action, which would help to confirm a reversal.

 

This concludes our section on dojis, but there is still more information about candlesticks in general that you need to know.  Remember that this isn’t simply just about learning abstract concepts – understanding these candlesticks will help you trade and profit better, so pay attention!
 

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