When participating in Forex or Fixed Time Trade investment, the first thing you need to do is to recognize the signs of a trend reversal with candlestick patterns. If you master this skill, your trading results will definitely be much better.
However, it is easy to say but not everyone can do this. At first, you need to know the reversal candlestick patterns. So in this article, I will guide you to recognize the trend reversal (from bearish to bullish and vice versa) through extremely accurate and effective 5 candlestick patterns in Olymp Trade.
The Piercing Pattern is similar in shape to the Bullish Engulfing. However, the difference lies in the second candle. It does not necessarily cover the first one. The 2nd candle only needs to close above 50% of the first.
The 1st candle is bearish and has a long body
The 2nd candle must open lower than the bottom of the 1st one. That means there is a gap here. Then it increases and closes above the middle of the first candle
Note: The Piercing pattern is highly effective when appearing at the end of a downtrend.
The market is going down and continues to fall sharply when the opening price of the following candle is below the closing price of the first candle and creating a gap. After that, the price returned to close above 50% of the previous candle’s body, showing that the buying force started to overwhelm the selling force. The trend will soon reverse from bearish to bullish.
Bullish Kicking candlestick pattern
Bullish Kicking is a highly effective reversal candlestick pattern from bearish to a bullish trend. It consists of two candles that appear at the end of a downtrend to start a new uptrend.
The 1st candle is a bearish one with a long body.
The 2nd candle must open higher than the top of the first. That means a bullish gap appears. And the 2nd candle closes above that gap.
In the Bullish Kicking pattern, the first candle is a sign that sellers are in control of the market. However, the gap on the 2nd candle is a significant change in market sentiment. The buyers completely get back all the shares that the sellers took in the previous session and get even more. It is shown by the price gap above the 1st candle and 1 strong bullish candle after that.
The point to emphasize in this reversal pattern is that most of the Sell positions in the previous session (first candle) were changed into losing positions in the next session on the second candle. Sellers are forced to surrender. They place buy orders and close sell orders to cover losses. This makes the uptrend stronger and stronger. Therefore, the price increases higher and higher in the next trading sessions.
Bearish Kicking candlestick pattern
Bearish Kicking pattern is used by many professional traders. It appears at the end of an uptrend to signal an impending downtrend.
The 1st is a long body bullish candle.
The 2nd candle must open lower than the bottom of the first candle. That means there is a bearish gap. Then the 2nd candle closes below that gap.
The Bearish Kicking candlestick pattern pushes the price down, which represents a drastic change in the market trend. Candle 1 is a strong bullish candle showing that buyers are in control of the market. However, candle 2 completely reversed the market when sellers push the price down deeper.
All buy orders placed at the time of the formation of the 1st candle are all lost in the 2nd candle. It forces the buyers to place sell orders and close buy orders to cover their losses. The strong downward momentum continues and pushes the price down deeper in the next sessions.
Three Outside Up candlestick pattern
The Three Outside Up is a bearish-to-bullish trend reversal candlestick pattern. It signals the next uptrend of the market. This candlestick pattern is highly effective when appearing at the end of a downtrend.
The first candle in the pattern is a bearish candle with a short real body.
The second candle is a strong bullish candle that closes higher or covers the body of the first candle.
The first and second candles form a Bullish Engulfing candlestick pattern.
The third candle is bullish. Its opening price is lower than the closing price of the second candle. And the closing price must be higher than the second candle in the pattern.
The market was experiencing a prolonged decline and investor sentiment has turned negative. This was shown by a bearish candle at the end of the session. A large buying force from bottom-fishing investors helped the market rise rapidly.
At the end of the session, a strong bullish candle formed and closed above the previous day’s decline. At this time, the Bullish Engulfing candlestick pattern has formed. In the third session, investor sentiment became more positive. The market rallied throughout the session and ended with the highest closing price in the pattern.
Three Inside Up candlestick pattern
Three Inside Up is a reversal pattern that provides a signal of the next uptrend in the market. This pattern usually appears at the end of a downtrend or the market is in a short-term correction.
The first candle in the pattern is a strong bearish candle with a long real body.
The second candle is a bullish candle that lies within the real body of the 1st candle. Its closing price is higher than half of the 1st candle’s real body.
The third candle is a bullish candle, whose closing price is higher than the body of the first candle.
The market was in a downtrend and investor sentiment became pessimistic. This was shown by the closing candle being a strong bearish one with a long real body. In the next trading session, the bearish market attracted investors to participate in bottom fishing. At the end of the session, a bullish candle closed more than half the body of the previous day’s bearish candle.
On the third candle, investor sentiment became more positive. The price rose sharply and closed the highest in the entire candlestick pattern. Positive sentiment and large supply overwhelmed the short-selling investors completely. The uptrend would continue and the market will reverse shortly.
There are more than 40 different reversal candlestick patterns on the Japanese candlestick chart. But you only need to remember the above 5 strongest reversal candlestick patterns.
When trading with reversal candlestick patterns, it is imperative to wait for the candle to close to confirm the type of candlestick pattern. When using the reversal candlestick patterns proficiently, it will be easier to catch the top and bottom. The probability of success will increase if you combine it with other technical tools. Wish you successful and happy trading.
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