Candlestick Patterns

More Patterns With Names Than You’ll Need

There are countless books that cover hundreds of candlestick patterns. There are a few so-called “Candlestick Experts” out there, one of whom charges thousands of US dollars to teach you the hundreds of patterns that, in theory, occur in the real markets.

Don’t get bogged down in trying to memorize the countless candlestick combinations that many experts feature in their books. Just get to know the basic patterns, and get really good at spotting them. Other than that, don’t read too much into candlestick patterns. We’ll teach you the handful of patterns that cover 99% of what happens in the real world.

What You Need to Know
Candlestick formations are best used to signal reversals. You will normally see these formations at Support and Resistance lines. A combination of a candlestick pattern and a support/resistance line usually represents a great trading opportunity. The only exception to this scenario is a continuation pattern, which is typically supported/resisted by EMAs!

So, here is your first rule of thumb on candlestick patterns:

If you see a candlestick pattern that is not near an area of support or resistance, forget about it.

Candlestick patterns are a very useful tool to the successful Forex trader. Like any other technical indicator, they do not provide a trade signal in and of themselves. However, they are important pieces of the puzzle. They are clues not to be ignored.