Before we move on today’ installment, let’s recap on what we’ve covered so far. First we started with The Fundamentals of Reading Candlestick Patterns. Next we moved on to How to Read Single Candlestick Patterns to Identify Potential Market Moves . Today we are going to learn how to get the reading on dual candlestick patterns on price action chart. In plain English, we are going to learn how to read candlestick patterns on the price chart.
Now some of you are probably wondering “What in the world are dual candlestick patterns?” Well dual candlestick patterns are formed by a combination of two candlesticks – a bull and a bear. Dual candlestick patterns come in very handy as far as analyzing currency pairs on the forex market are concerned. With dual candlestick patterns, you gain an edge by getting information on price action speedily without any hustle.
Dual candlestick patterns are generally considered the best price action analysis tool. They are considered the best because they accurately reflect the state of mind of forex traders Whether it’s bullish or bearish trend, you get immediate information as to the intentions of the traders. However,when you have a second candlestick forming, it could mean a couple of things: Either, the bulls and the bears are undecided what they want to do next. Or the prevailing trend is going into reverse.In plain English, a reversal of the current trend is unfolding. Now let’ take a look some illustrations of dual candlestick patterns.
Now engulfing candles are very powerful candlestick patterns humorously tagged by one forex website as carnivores. And I tend to agree with that assertion.Because not only do the engulfing candles cut through the price levels like a knife, but they completely swallow those candles the way a whale swallows a lobster. Now there are two types of engulfing candles: They are the bullish engulfing candle and the bearish candle. Let’s watch the bullish and bearish candlesticks on price action duty
To our immediate left is the bullish the engulfing candle. The bullish engulfing pattern is a two candle pattern signalling the imminent unfolding of a strong bullish offensive. As you can see, the bullish engulfing pattern takes off at the end of the bearish pattern. By that time the bears run out of momentum The last bearish candle is immediately followed by a humongous harami candle, kicking off the bullish offensive. See the way the bullish harami candle completely overshadows the bearish candle. That’s what we mean by engulfing. And it suggests that the bulls(or buyers) are sharpening their knives in readiness for their uphill surge.
However, the bearish engulfing pattern, to our immediate right, is the complete opposite of the its bullish counterpart. It looks like the bears are paying the bulls back in their own coin. The bearish engulfing pattern is a two candle pattern signalling the bears own surge down the slopes.The bearish engulfing pattern commences at the end of the bull’s offensive drive as they lose steam. Now see the way the bearish candle completely swallows the bullish candle. When that happens it can only mean one thing:That the bears have finally overrun the bulls and are starting their slalom run. In forex speak,it means they’re going to depress the price.
The next set of dual candlestick patterns is
Tweezer Tops and Bottoms
Now the tweezer tops and bottoms derive their name from the pliers that we use to pick up small unreachable objects. When you think about it, the candlesticks do look like tweezers. They are similar in and you don’t see one overshadowing the other. The tweezer tops and bottom patterns are what we’d call reversal patterns. You find them after the bulls and the bears have enjoyed sustained periods of dominance in the uptrend and downtrend respectively. This should alert you that a reversal is on the way. Let’s see both tweezer tops and bottoms on price action duty.
You can see why both tweezer bottoms and tweezer tops look like the tweezer pliers. They are all of the same size. You don’t see one candle devouring the other candle for lunch as is the case with the engulfing candle pattern. As you can see, the tweezer bottom formation unfolds at the end of the bearish run. When that happens, it means the bulls, through the hammer candle are sharpening their knives for their uphill push. The twee tweezer tops on the other hand, kick into action once the bulls run out of steam. Whenever you spot this scenario, know that the bears shift is on.
Just remember these few characteristics when reading both tweezer top and bottom formations:
- The first candlestick is similar to the overall trend. if price is moving up then it mean the first candlestick is bullish. And when you have a bullish candlestick, it can only mean one thing: That the bulls are about to head up the mountain.
- However, the second candlestick is completely opposite the prevailing trend. So if price moves up,then the candlestick is bearish. /and when you have a bearish trend, expect the bears to heading down the slope and depress the price further.
- The shadows of the candlesticks(or wicks sticking out of the butts of both candlesticks) are of equal length. equal length. That’s the standout characteristic of the tweezer tops and bottoms.
- Tweezer tops have the same highs. While tweezer bottoms have the same lows. No need to scratch your head over this one.
That’s a wrap for ”How To Get The Reading on Dual Candlestick Patterns .” Hopefully can recognize the Engulfing and and Tweezer patterns . You can also put what you’ve learnt into practice in an EasyMarkets demo acount. Next time we’ll continue with our series on reading candlestick patterns by tackling triple candlestick patterns.
Til next time take care.
Do You Want To Join The Forex Trading Gravy Train?
If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First, look up Why Forex Trade Is So Popular. Next, you learn the fundamentals of forex trading by reading Forex Trading Basics – Top To Bottom Part I and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns, Dual Candlestick Patterns, and Triple Candlestick Patterns . Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis, instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading?
Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels. And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know How To Read Candlestick Patterns using Support and Resistance Levels.
However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch of several weeks, consult How to Spot High Probability Trades. And if you are still not sure about price action trading, find out Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the suggested posts above are the most important posts to get you started.
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And if you are looking a place to put your price action trading strategies into practice(Including Reading Candlesticks to Identify Potential Market Moves), and get a simulated feel of live forex trading conditions before trading live, open a free demo trading account with Easymarkets. But if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading ebook