The appearance of a Doji should alert the trader of major decision. The Gravestone Doji is formed when the open and the close occur at the low of the day. This pattern is occasionally found at market bottoms. The Long-legged Doji has one or two very long shadows. Long-legged Dojis are often signs of market highs. The Bullish Engulfing Pattern is formed at the end of a downtrend.

As seen, a green body is formed that opens lower and closes higher than the red candle open and close from the previous day. The Bearish Engulfing Pattern is the direct opposite of the bullish pattern. This pattern is created at the end of an up-trending market. This shows that the bearish trends are now overwhelming the bullish ones.

The Dark Cloud Cover is a two-day bearish pattern found at the end of an upturn or at the top of a tight trading area. The first day of the pattern is a strong green real body. The Piercing Pattern indicates a bottom reversal. It is a two-candle pattern at the end of a declining market. The first day real body is red. The second day is a long green body.

The green day opens sharply lower reaching under the trading range of the previous day. The price comes up to where it closes above half of the red body. The Hammer and Hanging-Man are candlesticks with long lower shadows and small real bodies. The bodies are at the top of the trading session.

This pattern at the bottom of the downtrend is called a Hammer because it is hammering out a base. The Morning Star projects a bottom reversal signal.

Like the planet Mercury Morning Star , it foretells the sunrise, or the rising prices. This pattern consists of a three day signal. The Evening Star is the exact opposite of the morning star. Like Venus Evening Star , this occurs just before the darkness sets in. The evening star is found at the end of the uptrend and is also a 3-day pattern. A Shooting Star sends a warning that the top is near. Gravestone Doji shows that when the market was opened, its price was suddenly pushed down by the sellers.

Traders can make good profitability if they trade the gravestone Doji pattern. A long-legged Doji looks similar to a common Doji. However, it has a comparatively longer upper and lower wick. The long wick shows the indecisiveness of the market. When you see a long-legged Doji, try not to trade binary options you should know when , as it can make you lose all of your invested money. Once the wick gets shortened, you can trade.

A breakout trading in the candlestick chart shows the price movement of an asset. The price of a commodity has either moved beyond the resistance level or above the support level. The resistance or support level can also be seen as the stop loss point or an entry-level that can help traders earn huge profitability. When the price moves beyond the resistance or support level, traders have two options. Leaving the market can help those traders save themselves from huge losses.

Secondly, the traders waiting for the breakout can jump in when the breakout happens to make a significant profit. After the breakout, market volatility increases, and the price moves towards the breakout direction. Since breakout indicates a bigger price fluctuation and more volatility, it brings more profitability. To trading using this pattern, you need to analyze two things.

Firstly, the consistency of touching the resistance level. If the asset price has touched resistance and support level multiple times, their analysis becomes more valid. And secondly, the length of time it stays in play. If the support and resistance level remain in their position for a long time, the outcome is more favorable. Traders can quickly identify the chart pattern breakout as it is generally found at the starting point of a trend.

So, if you know how to identify a breakout in the market, you can increase your profitability. The next candlestick trading pattern is the fake breakout. This pattern is the opposite of breakout, and it is exactly what it sounds like.

One thing that makes a fake breakout pattern interesting is its unpredictability. The price moves in a way that traders assume that it might break out. So, they trade; however, the price deceives the trader by returning to the same level.

Fake breakout is one of the important trading patterns that even inexperienced traders can understand and identify. A false breakout in the trading chart represents one of two things. Either the price trend is going to resume soon, or the price is going to change shortly.

This situation arises when traders try to enter the market when everything is stable. However, when they make an entry, the price reverse. Thus, the time frame matters in the fake breakout. False breakout can happen in any market condition and price trend. To trade successfully in the false breakout , traders need to do a couple of things.

If this happens a couple of times, you can assume that the price trend will start again. A trendline is a way of knowing the price trend of an asset in the market. Identifying the trendline can help traders to make successful trades. A trendline is a simple and easy-to-use tool, divided into categories, i.

An upward trendline in the candlestick chart indicates there is an excess amount of buying in the market. That means the price of an asset is likely to increase. On the other hand, a downward trendline indicates the supply pressure. A downward trendline makes the price fall. Also, if the trendline is flat, that means the market price is moving in a steady direction.

Traders must not hold a long position when they see a downward trendline. A trendline in a chart is created by connecting a series of prices. To get a better idea, traders must only focus on the major swing points. Once you have made a trendline, you can identify the market quickly. You must trade around the trendline to grab better trading opportunities and increase your profitability. For entering the market, you can wait till the price breaks the trendline. It is one of the few patterns that can be easily identified and contains all the essential information.

The bullish engulfing pattern in the candlestick chart shows a downtrend. That means there is a rise in the buying pattern in the market. Two green candles represent it. The second green candle swallows up the body of the previous red candle. The bearish engulfing pattern is the opposite of the bullish engulfing pattern. This pattern occurs when the price of the asset falls as more sellers are entering the market.

This pattern is represented by two red candles where the red candle engulfs the next green candle. When you notice a bearish or bullish pattern, this means there will be a reversal in the trend. If traders hold a position on an asset whose price trend is about to end, they can use this pattern to exit the trending market. The morning star and evening star pattern are slightly different from the bullish engulfing and bearish engulfing pattern as it includes three candles rather than two. Morning star pattern can be defined as the visual representation of three candles that form a downtrend.

The presence of a morning star in the candlestick chart indicates the price trend is going to reverse. The evening star pattern in the candlestick chart is the exact opposite of the morning star pattern. It represents an uptrend in the market. Evening star patterns also tell about the future price reversal of an asset. This pattern generally appears when the market is showing either higher lows or higher highs.

If you want to trade the Evening Star candlestick pattern, do not wait for prices to drop down, as you might lose the trade. A piercing pattern is formed during pullback or at the end of the downtrend. It is further divided into two categories, i.

This pattern can be found in the chart when the second candle, i. This situation arises in the downtrend market. With the right information, you can correctly speculate the market and make a winning trade. To become a successful trader, you can pick the right candlestick pattern, stick to a detailed strategy , and never stop learning. For further reading, you can also read our ABCD pattern guide for Binary Options or Harmonic Pattern guide.

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Candlestick charts are perhaps the most popular trading chart. With a wealth of data hidden within each candle, the patterns form the basis for many a trade or trading strategy. Here we explain the candlestick and each element of the candle itself. Then we explain common candlestick patterns like the doji, hammer and gravestone. Beyond that, we explore some of the strategy, and chart analysis with short tutorials.

Reading candlestick charts provides a solid foundation for technical analysis and winning binary options strategy.

Japanese Candlesticks are one of the most widely used chart types. The charts show a lot of information, and do so in a highly visual way, making it easy for traders to see potential trading signals or trends and perform analysis with greater speed.

Many new traders are excited because they have some good results in the beginning by candlestick patterns without spending much time reading about trading, but in the long run they fail and they come back to learn more. Candlestick patterns are a good tool, but only for confirmation. Of course every trader should know how to read the candles. If you know how to read the candles properly, you can use them for confirmation in your trades — but first you must know the basics.

Japanese Candlesticks are a type of chart which shows the high, low, open and close of an assets price, as well as quickly showing whether the asset finished higher or lower over a specific period, by creating an easy to read, simple, interpretation of the market. Candlesticks can be used for all time frames — from a 1 minute chart right up to weekly and yearly charts, and have a long and rich history dating back to the feudal rice markets of ancient Samurai dominated Japan.

When information is presented in such a way, it makes it relatively easy — compared to other forms of charts — to perform analysis and spot trade signals. As indicated, each candle provides information on the open, close, high and low of an assets price. Each reflects the time period you have selected for your chart.

For example, if a 5 minute chart was used each candle shows the open, close, high and low price information for a 5 minute period. When 5 minutes has elapsed a new 5 minute candle starts. The same process occurs whether you use a 1 minute chart or a weekly chart. This is called the real body, and represents the difference between the open and close. If the close is higher than the open, the candle will be green or white; if the close is lower than open the bar will be red or black but other colors can often be found on different charts.

The open or close are not necessarily the high or low price points of the period though. If there are no upper or lower shadow it means the open and close were also the high and low for that period which in itself is a kind of signal of market strength and direction. These are called dojis and have special meaning, a market in balance, and often give strong signals. Due to the highly visual construction of candlesticks there are many signals and patterns which traders use for analysis and to establish trades.

What many traders fail to pay attention to is the tails or wicks of a candle. They mark the highs and lows in price which occurred over the price period, and show where the price closed in relation to the high and low. But on some days, as when the price is trading near support or resistance levels, or along a trend line, or during a news event, a strong shadow may form and create a trading signal of real importance. If there is one thing that everyone should remember about the candle wicks, shadows and tails is that they are fantastic indications of support, resistance and potential turning points in the market.

To illustrate this point lets look at two very specific candle signals that incorporate long upper or lower shadows. The hammer is a candle that has a long lower tail and a small body near the top of the candle.

It shows that during that period whether 1 minute, 5 minute or daily candlesticks that price opened and fell quite a distance, but rallied back to close near above or below the open. But they are significant when a long lower tail—hammer—is seen near support.

It indicates the sellers tried to push the price through support but failed, and now the buyers are likely to take price higher again. The thing to remember here is that a hammer could indicate a new area of support as well. Three candles, all with long tails occurred in the same price area and had very similar price lows. That three long tailed candles all respected the same area showed there was strong support at It shows that during the period whether 1 minute, 5 minute or daily candlesticks that price opened then rallied quite a distance, but then fell to close near above or below the open.

This is sign that sellers stepped into a hot market and created a graveyard for the buyers. Long upper tails are seen all over the place, and are not significant on their own. But they are significant when a long upper tail—gravestone—is seen near resistance, unless of course a new resistance level is being set. It indicates the buyers tried to push the price through resistance but failed, and now the sellers are likely to take price lower again. The price tested this resistance area multiple times, finally it broke above it, but within the same bar one hour the price collapsed back.

The price did proceed lower from there. Look for them on candles, they are important. Multiple long tails in one area, like in figure 1, show there is a support or resistance there. A hammer opens and closes near the top of the candle, and has a long lower tail. A gravestone opens and closes near the bottom of the candle, and has a long upper tail. The next thing to look out for is the doji, a candle that combines traits of the hammer and gravestone into one powerful signal. Dojis are among the most powerful candlestick signals, if you are not using them you should be.

Candlesticks are by far the best method of charting for binary options and of the many signals derived from candlestick charting dojis are among the most popular and easy to spot. There are several types of dojis to be aware of but they all share a few common traits. First, they are candles with little to no visible body, that is, the open and closing price of that sessions trading are equal or very, very close together. Dojis also tend to have pronounced shadows, either upper or lower or both.

These traits combine to give deep insight into the market and can show times of balance as well as extremes. In terms of signals they are pretty accurate at pinpointing market reversals, provided you read them correctly. Like all signals, doji candles can appear at any time for just about any reason. It takes other factors to give the doji true importance such as volume, size and position relative to technical price levels. Truly important dojis are rarer than most candle signals but also more reliable to trade on.

Here are some things to consider. First, how big is the doji. If it is relatively small, as in it has short upper and lower shadows, it may be nothing more than a spinning top style candle and representative of a drifting market and one without direction. If however the doji shadows encompass a range larger than normal the strength of the signal increases, and increases relative to the size of the doji.

Candles with extremely large shadows are called long legged dojis and are the strongest of all doji signals. One of this type appearing at support may be a shooting star, pin bar or hanging man signal; one occurring at support may be a tombstone or a hammer signal.

Look at the example below. There are numerous candles that fit the basic definition of a doji but only one stands out as a valid signal. This doji is long legged, appears at support and closes above that support level. Another confirming indication that a doji is a strong signal and not a fake one is volume.

The higher the volume the better as it is an indication of market commitment. In respect to the above example it means that price has corrected to an extreme, and at that extreme buyers stepped in. It also means that near term sellers have disappeared, or all those who wanted to sell are now out of the market, leaving the road clear for bullish price action. A doji confirming support during a clear uptrend is a trend following signal while one occurring at a peak during the same trend may indicate a correction.

The same is true for down trends. Failing to account for trend, or range bound conditions, can be the difference between a profitable entry or not. The below demo video, explains how to configure a robot using the builder feature at IQ Option.

The video explain how to specifically setup a strategy based on candlesticks, and doji patterns within them;. In the example above a call option is clearly the correct thing to do but if purchased at the close of the doji, it could easily have resulted in a loss. The doji shows support like sonar shows the bottom of the ocean but that does not mean a reversal will happen immediately. The best thing to do is to wait for at least the next candle and target an entry close to support.

This same is true for resistance as well. Expiry will be your final concern. This is a very apt saying that simply means getting caught up in the small things and not seeing the bigger picture. This can happen all to often when trading and is especially common among newer traders. Candlesticks, and candlestick charting, are one of the top methods of analyzing financial charts but like all indicators can provide just as many bad or false signals as it does good ones.

For that reason alone it is a good idea to filter any candle signal with some other indicator or analysis. I like them because they offer so much more insight into price action. Switching from a line chart to an O-H-L-C chart to a candlestick chart is like bringing the market into focus. The candles jump off the chart and scream things like Doji, Harami and other basic price patterns that can alter the course of the market. The thing is, these patterns can happen everyday.

Which ones are the ones you want to use for your signals? That is the question on the mind of any one who has tried and failed to trade with this technique. Look at the chart below; a new candle forms every day. Some day a bullish candle, some days a bearish one, some times two or more days combine to form a larger pattern.

Look at the chart below. I have marked 8 candle patterns widely used by traders that failed to perform as expected. Why is this you may ask yourself?

It all comes down to where the signals occur relative to past price action.

The lower part of this candlestick represents resistance which was not surpassed during the period. A breakout trading in the candlestick chart shows the price movement of an asset. You must wait until you find a Red or Green candlestick formation, as shown above. This situation arises when traders try to enter the market when everything is stable. On the other hand, if the candlestick is red bearish , this shows the opening price of an asset was more than the closing price. It is a SELL signal. Similarly, if the tail of a candlestick is longer than its wick, it means that the market sellers were active during the trading session.

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