Well on this occasion we will continue the chapter on Japanese candlestick patterns. Regarding single candlestick patterns, dual candlestick patterns, and triple candlestick patterns.
Single candlestick patterns, dual and triple candlesticks have a function as a confirmation signal.
On the basic candlestick patterns on Japanese candlesticks.
By grouping into three subtopics
This is only to make it easier to help recognize patterns formed on the trading platform.
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Single candlestick pattern
In the single candlestick pattern, there are four candlestick patterns that function as reversal signals.
So even if only one candlestick appears it can be said to be a confirmation signal in determining a new position.
The four types of single candlestick patterns are a hammer and hanging man, an inverted hammer and a shooting star.
Hammer and hanging man
In both of these patterns between the hammer and hanging man, they have similar shapes is single candlestick patterns.
But the difference is the color of the candlestick which means it depends on the previous price action.
Both have a long lower shadow with a small real body.
You can see the difference in the image below
Hammer, this pattern resembles a hammer, is a bullish reversal pattern formed during the downtrend phase, so-called because the market is hammering from the bottom, in the single candlestick patterns.
If during the downtrend the hammer-shaped candlestick appears, then it is possible for the price to rise again.
Long shadows that appear as lower shadows provide information that when a seller presses down, but finally the buyer gives a strong resistance so that the closing price is near the open price.
But the appearance of a hammer pattern when this downtrend is not enough to be a buy signal, you should not automatically open a buy position.
Still requires bullish signal confirmation as a reference to determine buy entries
In the example image above you still, need to wait for the bullish candlestick after closing the hammer to determine a more valid entry signal.
Criteria for determining and recognizing hammer
- The length of the lower shadow is about two or three times the length of the real body.
- There is no upper shadow or only a very short shadow.
- The upper real body ends at the trading range.
- The real color of the candlestick’s body is not so important.
The hanging man pattern is a bearish reversal pattern, which is also an indication that the area is a resistance zone, in the single candlestick patterns.
Hanging man pattern occurs in the condition of rising price trends, then the seller begins to flood and weaken buyers.
Hanging man pattern is similar to hanging man, long lower shadow gives information that sellers start pressing down when the uptrend occurs at a certain time frame.
But buyers try to push back up prices, but at closing prices only close to the open price.
When finding this pattern appears it should be a warning that the buyer is not big enough to push prices up higher.
Criteria for determining and recognizing hanging man patterns
- Lower shadow length is approximately two or three times that of the real body.
- There is no upper shadow or only a small upper shadow.
- The real body ends in the trading range in the time frame.
- Real body color is not so important but black shows more bearish than white.
Inverted hammer and shooting star
The shape of the inverted hammer and shooting star is also identical.
When compared with the hammer and hanging man pattern.
It has an inverted position, where the inverted hammer and shooting star has a long upper shadow and no lower shadow or only a small lower shadow.
While hammer and hanging man has the long lower shadow.
If you find an inverted hammer pattern it is a bullish reversal pattern, whereas if you find a shooting star pattern it is a bearish reversal pattern.
Both have a long upper shadow with a small real body, with no lower shadow or only a small lower shadow, the opposite of a hammer and a hanging man.
The inverted hammer occurs when the market is downtrend, then there is pressure from the buyer that causes prices to rise.
But the seller presses back so that the closing price is near to the open price.
Pressing prices to continue to fall requires more sellers, but this does not happen and sellers begin to weaken.
However, the appearance of this inverted hammer pattern is not enough to be a buy signal.
You still need confirmation of the candlestick after inverted hammer, make sure that it is a white candle or bullish candle.
Criteria for determining and recognizing an inverted hammer
- Upper shadow length is approximately two or three times that of the real body, and this occurs in a downtrend
- There is no lower shadow or only a small shadow.
- The real body ends in the trading range in the time frame.
- Real body color is not so important but white is more bullish than black.
A shooting star has an identical shape with an inverted hammer, this is a bearish reversal signal.
This pattern is an indication of a bearish reversal when it appears after the uptrend.
When the price trend is rising, then a shooting star pattern appears.
This provides information that when the buyer presses the price to go up but then gets resistance from the seller so that the closing price is near to the open price.
But to make this pattern a sell signal, you still need to wait for the candlestick afterward, making sure that what appears is a black or bearish candlestick.
Criteria for determining and recognizing shooting stars
- Upper shadow length is approximately two or three times that of the real body
- There is no lower shadow or only a small shadow.
- The candlestick color is not so important, but black is more bearish than white.
Dual candlestick pattern
The next chapter is about dual candlestick patterns, this pattern gives a better confirmation signal than single candlestick patterns.
There are two types that fall into the dual candlestick pattern category, which are engulfing candles and Tweezer Bottoms and Tops.
Engulfing candle patterns are easy to analyze, the probability of trading when finding an engulfing candle pattern is quite high, especially in a trending market.
It provides a strong signal reversal.
There are two types of engulfing candle patterns namely the bullish engulfing pattern and the bearish engulfing pattern.
The engulfing candle pattern consists of two candlestick bars where the last bar ‘engulf’ the previous bar with the characteristics of a longer body candle.
This engulfing pattern will provide a valid signal if it has a short shadow or no shadow.
Because the long shadow reflects the uncertainty in the direction of price movements or a tendency to consolidate.
To determine the validity of this pattern with the length of the tail bar that ‘engulf’ no more than 20% -25% of the total length of its body candle.
Bullish Engulfing Pattern
This pattern is a signal to open long positions.
When the market trend is downtrend, then a bullish candle that appears longer than the previous candle, this pattern is bullish engulfing.
To obtain the valid signals, market movements are truly in a trending state, not sideways or consolidated.
The image above shows a bullish engulfing pattern where the first candle is a bearish candle (red in the picture above, you can change the color to white on the trading platform) or Doji candle.
And the next candle (engulfing candle) must be a bullish candle (green) with a body the longer one.
If the engulfing candle engulfs two or three previous candles, the bullish signal appears stronger.
Bearish Engulfing Pattern
Bearish Engulfing pattern, this is the opposite of the bullish engulfing pattern.
This pattern appears when the uptrend where a bullish candle is followed by a bearish candle that engulfs the previous candle.
This pattern is a signal to open short positions.
Same as bullish engulfing, in order to obtain accurate results the market should really be a strong trend.
In the image above is a bearish engulfing pattern marked by the appearance of a bearish candle with red color (you can change the color to black on the trading platform) that engulfs a bullish candle with green.color.
If this engulfing candle engulfs two or three previous candles, this gives a strong short signal.
Tweezer Bottoms and Tops
Tweezers bottom and tops are dual candlestick patterns that provide reversal signals.
This pattern appears when a downtrend or uptrend indicates that a trend will change soon.
Tweezer candlestick patterns are divided into two patterns namely tweezer top and tweezer bottom.
Both have two or more candle bars where the high or low price is at the same level or not far adrift.
The tweezer top is formed at the time of the uptrend which then appears the first bar shows a bullish candle (the price closes above the open price) while the second candle has the same high or “tight” with the previous bar.
The image above shows the uptrend then two candlesticks with the same high and the same upper shadow length, with the same low, but the first candle is a bullish candle and the second is a bearish candle.
If this pattern appears then it is a short signal, as a sign of the probability of a reversal from bullish to bearish.
The tweezer bottom is the opposite of the tweezers’ top pattern, if in a downtrend then tweezers pattern appears marked by two candles with the same low, or tight, where the first candle is a bearish candle and the second candle is a bullish candle.
If this pattern appears it indicates a possibility of a bearish reversal from changing to bullish.
The image above shows two candlesticks with the same body, like the same two tweezers, and that happens after a downtrend.
The first candle is a bearish candle and the second candle is a bullish candle with the characteristics of having the same low.
Discover and determine the characteristics of tweezer patterns
- The first candle is the same as the overall trend, if the trend is up then it is a bullish candle, otherwise, if it is a downtrend then it is a bearish candle.
- The second candle is the opposite of the overall trend, if it is on an uptrend then it must be a bearish candle, conversely, if on a downtrend it must be a bullish candle.
- Shadow the two candlesticks should be equal.
- The tweezer top has the same high and tweezer bottom has the same low.
Triple candlestick patterns
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Triple candlestick patterns are patterns that consist of three candlesticks that indicate a reversal pattern.
Triple candlestick patterns consist of, Evening and Morning Stars, Three White Soldiers and Black Crows, Three Inside Up and Down.
Evening and morning star
Evening and morning star is a triple candlestick pattern that is usually found at the end of a trend as reversal patterns.
Evening star starts at the uptrend which then appears a triple candle evening star pattern, conversely the morning star starts at the downtrend then appears a triple morning star cand.
Evening star appears when the market is an uptrend, the first candlestick is a bullish candle, then the second candlestick is an indecision candle or Doji, and the third candle is a bearish candle
In the image above shows the uptrend, then a triple candlestick pattern appears as a signal of reversing the trend up to bearish.
The first candle is a bullish candle, then followed by the indecision candle, which shows the buyers are starting to weaken and the third candle is a confirmation of the indecision candle which is a bearish candle.
Morning star is a bullish reversal signal, which occurs in a downtrend and then a morning star triple candlestick pattern appears, this is indicating to open a long position.
In the image above shows the morning star pattern on a downtrend, its characteristics are the first candlestick is a bearish candle, then the second candle is an indecision candle, and the third candle is a bullish candle.
The pattern provides information when a downtrend occurs then the seller begins to weaken so that an indecision candle or Doji appears, then the third candle is a bullish reversal signal that forms a bullish candle.
Three white soldiers and black crows
Three white soldiers and black crows are triple candlestick patterns which are trend reversal patterns, giving an indication of trend changes when the pattern appears.
Three white soldiers
The characteristics of the Three White Soldiers formation are the appearance of three consecutive candlesticks with closing prices always higher; usually all white or green.
Therefore, the Three White Soldiers indicate the potential that prices will reverse the uptrend from the previous downtrend.
In the image above provides information when downtrend then appears bullish candle as a sign the seller is starting to weaken, then followed by a bullish second candle with a higher high without shadow, while the third candle is a bullish candle which is the same as the second candle without shadow.
If the pattern appears then this is a signal for a long position as a sign that the downtrend has ended and will change the uptrend.
Three Black Crows
Triple Three Crows candlestick pattern is the opposite of the pattern of three white soldiers where this occurs in the uptrend and is a sign of a bearish reversal after bullish.
Three Black Crows are three consecutive bearish (black) candlesticks with closing prices always lower. This candlestick indicates the potential that prices will reverse after the previous uptrend.
The image above provides information when the uptrend then appears a bearish candle (black) indicating that the buyer has started to weaken, then followed by a second candle with a longer body and lower low, while the third candle has a body that is at least the same as the second candle and no shadow.
These three candle formations are bearish reversal patterns and give short signals.
Three Inside Up and Down
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Three Inside Up and Three Inside Down are triple candlestick patterns that give an indication of a trend reversal.
Three Inside Up signifies the possibility of reversal bullish direction when a downtrend occurs.
On the contrary, Three Inside Down signifies the possibility of a bearish reversal, when an uptrend occurs.
Three Inside Up
Three Inside Up is a triple candlestick pattern that occurs in a downtrend, if this pattern appears then it is an indication that the bearish trend has ended and the possibility of changing the bullish trend.
The image above shows a pattern of three inside up patterns, where the first candle has a lower bottom on a long downtrend, the second candle is a bullish candle that is on the first midpoint candle (inside the bar), and the third candle close price higher than the first candle.
The third candle is a confirmation signal for long positions because the buyer has indicated an increase while the seller is weak.
Three inside down
The opposite of three inside up, three inside down occurs in an uptrend market, if this pattern appears after a long uptrend, then this is an indication of a change in trend from bullish to bearish.
The image above is a long uptrend, then three inside down patterns appear, the first candle is a bullish candle on the top of the uptrend, the second candle is a bearish candle that is on the first midpoint candle (inside the bar), and the third candle has a lower low than first low candle.
The third candle is a signal confirmation to open a short position, which gives an indication that the seller is starting to increase while the buyer is weakening.
Studying candlestick patterns may seem simple, but this is the basis of technical analysis that will provide a lot of understanding of how the market works.
Single candlestick patterns, dual candlestick patterns, triple candlestick patterns are patterns that provide the possibility of reversal when a long trend occurs.
If you apply this method to trading, your experience will provide lessons and will better recognize the characteristics of the market, so applying risk management is very important because a forex trader is a risk manager.