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Forex Candlestick Chart Explained

Candlestick chart patterns can be extracted from Foreign exchange charts. Below are descriptions of the most commonly found chart patterns used for Forex.

Doji

A name for candlestick chart patterns that provide information on their own and feature in a number of important patterns. Dojis form when the body of the candle is minimal as market's open and close are virtually equal.

Hammer

A price pattern in candlestick charting that occurs when the market trades significantly lower than its opening, but rallies later in the day to close either above or close to its opening price. This pattern forms a hammer-shaped candlestick.

Inverted hammer

A price pattern in candlestick charting that occurs when a security trades significantly higher after its opening, but gives up most of all of its intraday gain to close well off of its high. Gravestone - The market gaps open above the previous day's close in an uptrend. It rallies to a new high, then loses strength and closes near its low: a bearish change of momentum. Confirmation of the trend reversal would be an opening below the body of the Shooting Star on the next trading day. If the open and the close are identical, the indicator is considered a Gravestone Doji. The Gravestone Doji has a higher reliability associated with it than a Shooting Star.

Shooting star

A candlestick indicating a reversal. The previous day's candle has a very large body. On the day the shooting star occurs, the price (generally) opens higher than the previous day's close, then jumps well above the opening price during the day, but closes lower than the opening price.

Three white soldiers

Three white soldiers is a bullish reversal pattern that forms with three consecutive long white candlestick chart patterns. After a decline, the three white soldiers pattern signals a change in sentiment and reversal of trend from bearish to bullish. Further bullish confirmation is not required, but there is sometimes a test of support established by the reversal.

Three black crows

A bearish reversal pattern consisting of three consecutive black bodies where each day opens higher than the previous day's low, and closes near, but below, the previous low.