Candlestick Patterns – The most powerful ones

In this post, we are going to see and learn the most powerful candlestick patterns. If you are a trader, then you should include these candlestick patterns in your list of trading strategies.

You will find a lot of articles and YouTube videos about candlestick patterns, so what is so special about this post? Well, all of them will list out all available patterns for you, but, here in this post, we have chosen 3 best of them

Yes, you read that right! Only 3 but most powerful candlestick patterns after a lot of back testing and experience – Which will give you good accuracy and big profits!

 

What are candlestick patterns?

Candlestick pattern is a candlestick or set of candlesticks resembling a structure or forming in a particular pattern. All candlestick patterns are named either according to their shape, structure or their significance.

These patterns are widely used in technical analysis, in fact, They are an important part of technical analysis.

Now that you know what are candlestick patterns, Let’s See and learn about the most powerful of them.

 

3 powerful candlestick patterns

Let’s take a look at 3 most powerful candlestick patterns, one by one, in detail.

We will also explain how to trade each of these patterns, so, hang in there, pay attention 🙂

1. BEARISH ENGULFING CANDLESTICK PATTERN

powerful candlestick patterns #1

The first of powerful candlestick patterns is a ‘BEARISH ENGULFER’. Bearish engulfing pattern is formed when – a bullish candle is completely engulfed (covered) by a bearish candle (Refer above figure).

In other words, a bearish candle completely covers the previous bullish candle. A bearish candle completely dominates the previous bullish candle.

NOTE: Previous candle or preceding candle must be a BULLISH candle always, otherwise, it is not a bearish engulfing candlestick pattern.

Here is a list of points to remember while trading a bearish engulfing candlestick pattern,

  • Always look for bearish engulfing pattern in an uptrend, this candlestick pattern does not work well in downtrends. whenever this pattern forms at resistance levels in uptrend, it means the price is GOING DOWN

  • This candlestick pattern MUST form at a key level (resistance, moving average, Bollinger bands etc.) otherwise, it is not valid. You cannot trade this pattern if it forms randomly anywhere on the chart other than key levels.

  • Stop loss will be 20-30 pips above the bearish engulfing candle, and take profit or profit target will be next major support level.

 

2. PIN BAR or BEARISH PIN BAR PATTERN

The next in the list is – Pin Bar pattern. This pattern is formed when the sellers are in control, they take control and form a ‘inverted hammer’ like structure. (refer the figure below)

powerful candlestick patterns #2

In other words, this pattern is formed, when the sellers over power buyers, and close the candle lower forming a candle which looks like an inverted hammer.

NOTE: A pin bar may contain a lower wick / shadow as well. It is not necessary for a pin bar to have only higher wick / shadow and not have any lower wick.

Here is a list of points to remember while trading a pin bar candlestick pattern,

  • Always look for pin bar pattern in an uptrend, this candlestick pattern does not work well in downtrends. whenever this pattern forms at resistance levels in uptrend, it means the price is GOING DOWN, and you can take a SELL trade

  • This candlestick pattern MUST form at a key level (resistance, moving average, Bollinger bands etc.) otherwise, it is not valid. You cannot trade this pattern if it forms randomly anywhere on the chart other than key levels in uptrend.

  • Stop loss will be 20-30 pips above the pin bar candle, and take profit or profit target will be next major support level.

  •  

3. BULLISH ENGULFING CANDLESTICK PATTERN

The third and the final one in our list is – ‘BULLISH ENGULFING’ pattern.

Bullish engulfing pattern is formed when – a bearish candle is completely engulfed (covered) by a bullish candle (Refer below figure).

powerful candlestick patterns #3

In other words, a bullish candle completely covers the previous bearish candle. A bullish candle completely dominates the previous bearish candle.

NOTE: Previous candle or preceding candle must be a BEARISH candle always. Otherwise, it is not a bullish engulfing pattern.

Here is a list of points to remember while trading a bullish engulfing pattern,

  • Always look for bullish engulfing pattern in a downtrend, this candlestick pattern does not work well in uptrends. whenever this pattern forms at support levels in downtrends, it means the price is GOING UP, time to take a BUY trade.

  • This candlestick pattern MUST form at a key level (resistance, moving average, Bollinger bands etc.) otherwise, it is not valid. You cannot trade this pattern if it forms anywhere on the chart randomly.

  • Stop loss will be 20-30 pips below the bullish engulfing candle, and take profit or profit target will be next major resistance level.

 
 

CONCLUSION

In this article, We have discussed 3 most powerful candlesticks patterns in detail. These patterns can yield good profit on any day! and it is very wise to include these candlestick patterns in your collection of trading strategies.

 

Also Checkout : How to Make Money on Forex ?

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