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Introduction

- Candlesticks Broken Down
- Candlestick Trading Strategies
- Engulfing Candlestick
- Inside Bar Candlestick
- Doji Candlestick
- Star Candlestick
- Hammer Candlestick
- Hanging Man
- Spinning Tops
- Conclusion

Introduction

Japanese Candlesticks are the commonly used red and green bars that you may have often seen people use when analysing market charts. These apply in all markets, but for the purpose of this document we will be referring to the FX market. Majority of traders in current time will adopt these candlestick as opposed to line charts or bar charts, as they are more visually pleasing and allow the trader to analyse the market more effectively than other techniques, within this e-book you'll learn to key candlestick patterns that can help define effective entry and exit opportunity.

Majority of traders in current time will adopt these  candlestick as opposed to line charts or bar charts,  as they are more visually pleasing and allow the trader  to analyse the market more effectively than other techniques. For us, green bars will be seen as an increase in price / bullish movement / long movement. And red bars will be  seen as a decrease in price / bearish movement / short
movement.

There is lots of different terminology you  will soon pick up as you begin your forex journey but you  will soon understand.  Candlesticks in my opinion is the first strategy in forex  that you should learn inside out.

Candlesticks alone can  indicate trading opportunities as well as indicating when  an entry for larger more profitable strategy could arise.  Additionally, certain candlesticks can signal traders to  exit trades too and look for re-entries. This document  will contain a variety of important candlesticks which you should learn so that when you identify these on charts, you can understand when there may be certainty and uncertainty in the market, prompting you to enter or close a position/trade.

Candlesticks Broken Down

Now that you have been introduced to candlesticks, the next stage is to understand  how candlesticks work. Each candlestick you see on the chart will have an open and close price. The open price is where the candle has started at and the close price is where the candlestick  ended during that time frame.

If the candle would drop down in price from where it had opened and then closed below the price it had opened, this would for a red candle, if the price had increased  in price from where it had opened and closed above the price it had opened, this would form a green candle.

The candles will display a body and a wick(s), the diagram below displays the ‘open’, ‘close’, ‘high’ and ‘low’. The body of the candle shows where the price had opened and  closed and shows the strength of the buying power or the selling power, generally the greater the body and smaller the wick, the greater indication of buying or selling power there has been within that time frame.

The wicks, i.e the line formed between the ‘open’ and ‘high’ and the ‘close’ and the  ‘low’ is the further range the price of that pair has moved during the timeframe  period, but was not sustainable up until the end of the period where the candle  closes and next candle starts.

Candlestick Trading Strategies

- Eungulfing Candlestick

The engulfing candlestick trading strategy as mentioned in the introduction is more  commonly used when used in conjunction with another trading method. Engulfing  candles can be useful when you’re looking to enter support and resistance  trades or Fibonacci retracements these candles indicate reversals, when you are  approaching your support or resistance zones, look for an engulfing candle which  will indicate the bull dominating the bears or vice versa.

On the below chart I have marked blue dots on a few occasions where there is a bullish/bearish engulfing candle and the market has moved in the direction of the prevalent traders.

Ultimately, engulfing candlestick