How To Get The Reading On Dual Candlestick Patterns

Hello People

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.

First off:

Engulfing Candles

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

Candlestick Patterns: Bullish and Bearish Engulfing

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.

Candlestick Patterns: Tweezer Bottoms and Tweezer Tops

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.

Wanna Subscribe To My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

P.S. if you want to know everything there is to know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life as a trader. It sure did mine.

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

 

 

 

 

 

 

 

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We’re Going to Engulf Some Candles….

Today, we’re going to engulf some candles.. No, we’re not talking about an all night candle vigil here.  We’re going to learn how to trade one of the most popular high probability trades , the Engulfing Candle Trading Strategy.  NowWhy is the engulfing candle trading strategy popular among traders?Because it’ so easy to spot the with naked eye. In fact, you’ll need your head examined if you  miss this one. Majority of traders prefer trading this strategy during daytime trading, although it can be applied in other trading time frames also.

So here is what we’re going to do. As always, we’ll define what the engulfing candle strategy is, and then show you  how to trade the engulfing candles.

First of:

What are Engulfing Candles?

Well,engulfing candles are candles engulf the previous  candle in the prevailing trend.  It basically overshadows the previous bar to signal the end  one trend and the beginning of the next one. What you need to understand is that the engulfing candle must have a higher high  than the previous candle and a higher low . In other words, the engulfing candle must be bigger and full than the previous  candle for it  to be considered an engulfing candle.Just think of a full glass of water when looking for an engulfing  candle.

Also, when looking for engulfing candles, make sure they satisfy two critical criteria: That they large and obvious, and they form at swing points. Now what do I mean by swing points?swing points are the highs and lows on the chart.(In fact you’ve just reminded me.We’ll touch on trading swing points next session.

Let’s look at two types of engulfing candles. First:

Bullish Engulfing Candle

As the name entails, the bullish engulfing candle  kickstarts the bullish trend. the bullish engulfing candle forms when the bigger part completely envelops the downtrend candle. This development signals the beginning of the uptrend or, surge for the hills,as I like to put it. The bigger part signifies the opening and closing prices of the bar, while the wicks (the two tails at the high and low ends of the bar)mark the high and low.

Next is:

Bearish Candle

The scenario  for the bearing engulfing candle is very similar tot the bullish engulfing pattern.  Again,as the name entails the bearish engulfing candle signifies the end of the uptrend and kickstarts the bearish trend or nosedive to the valley.. The bearish engulfing  candle forms when the bigger part eclipses the smaller  bullish candle.  And, just like the bullish engulfing candle.The difference here is that the bears close at a low.Let’s take a look at two graphical illustrations of both bullish and bearish engulfing

Let’s take a look at both bullish and bearish engulfing patterns.bullish -bearish-engulfing

 

 

Right in front of are illustrations of   the bullish and bearish candle engulfing patterns.   With the bullish pattern, you can see the white bullish engulfing candle eclipsing the small black bearish candle. This signifies the end of the downtrend and the bullish trend.  The full part indicates the opening and closing prices,  while the short wick(or thin upper tail) indicates the high peak.while  And when you see such a setup, don’t think twice about putting in a buy (or long) trade.

It’s the similar situation with the bearish engulfing candle pattern. Except that the bearish engulfing candle signifies the end of the uptrend and the beginning of the downtrend.  We have a  role reversal in that you now have the black bearish engulfing candle towering over the little white bullish candle.  The other difference is that you have two short tails indicating the high and low. When you see this set up, no one should tell you you  have to sell. I’ll show you later howt o place your trades using  both bullish and bearish patterns. So don’t panick.

Which finally brings us to:

How To Trade Engulfing Candle Strategy

Traditional trading wisdom suggests that you wait for the one engulfing candle to fill like like a glass of water before you make your entry trade. One an engulfing candle fills up completely, and the next engulfing candle resumes make your initial trade entry.

The most sensible way to make your entry is to place a pending long order a few pips above  the high of a bullish engulfing candle and a few pips below the low of a bearish engulfing candle.

If you want a safe spot to place your stop loss,do it on the opposite side of the engulfing bar. For a bullish engulfing bar you place  the stop loss a few pips below the low of the bar. While, for a bearish engulfing bar you , you place your stop loss a few pips above the high of the bar. The stop loss serves a very important purpose for two reasons. First,it gives your trade time to breathe in case the market does an unexpected 360 U-turn. It’s not uncommon for the market to  retrace back into the bar and resume on its journey without threatening to crush the entire bar by breaching it at the other end.

Secondly, the stop loss below the bullish engulfing bar serves as a buffer against a sharp U-turn by the market. This sharp U-turn swill definitely  spike your blood pressure a few notches, and we don’t want that. Do we? Let’s look at a few  illustrations of  entry and stop loss placement in both candle patterns – starting with the stop bullish engulfing pattern.

bull-entry.png

As you can see, the blue arrow indicates the  buy entry  a few pips above the high  of the bullish candle. The stop loss is nicely placed below the low of the bar at the support level.. This gives your trading position some leg room in the event of a market retrace.

Now let’s look at the entry and  stop loss situation on the bearish engulfing candlebearish-stop.png

As you can see,the initial entry is placed below the low  of the engulfing  bar.  The stop loss is  placed a few pips above the high of the bar.Also take a look at the way the bar following the bearish engulfing bar pulled back slightly. This is why it’s important to give your trade some leg room in case of any unexpected U-turn by the market.

 

That’s  a wrap for “We’re Going To Engulf Some Candles.”The Engulfing Candle Trading Strategy is highly profitable among forex traders. If you are able to recognize the big bars eclipsing the smaller bars at the end of the prevailing trends, you’re good to go. Next time we’ll touch on how to trade swing points.

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.

Wanna Subscribe To My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

P.S. If you want to know everything there is to know about price action trading  Download for free The Ultimate Guide To Price Action Trading by Rayner Teo .This brilliant ebook will change your life as a trader. It sure did mine. And if you want a place  to put your price action trading strategies into practice(Icluding Trading Confirmation Signals), and get a simulated feel of live forex trading conditions   before trading live, open a free demo trading account with Easymarkets. And 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

 

 

P.S. If you want to know everything there is to know about price action trading  Download for free The Ultimate Guide To Price Action Trading by Rayner Teo .This brilliant ebook will change your life as a trader. It sure did mine. And if you want a place  to put your price action trading strategies into practice, and get a simulated feel of live forex trading conditions   before trading live, open a demo trading account with Easymarkets. And if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets

P.S. If you want to know everything there is to know about price action trading  Download for free The Ultimate Guide To Price Action Trading by Rayner Teo .This brilliant ebook will change your life as a trader. It sure did mine. And if you want a place  to put your price action trading strategies into practice, and get a simulated feel of live forex trading conditions   before trading live, open a free demo trading account with Easymarkets. And 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

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