Bab 2 Candlestick Strategies Condensed Vol:1
Star Candlestick Pattern
There are two forms of star candlestick patterns, the evening star pattern and the morning star pattern, both patterns constitute of three candles and therefore is a three candle formation. The more candles that form a pattern give greater confirmation of your anticipated trading strategy.
The evening star pattern displays a signal for a short trade, often encountered when approaching a resistance level or key zone. It gives indication of a reversal, and can also be used to highlight trend breakouts for continuation patterns.
Similar to the evening star, we have the morning star. This displays a signal for a long trade, often encountered when approaching support level or a key zone. It again gives indication of a reversal. Items 1 to 6 on the diagrams above show step-by-step the approaching setup for a evening/morning star pattern.
Hammer Candlestick
The hammer candlestick is a price pattern you will find amongst your time charting when security in the price has been declining over the duration of that time frame period, but then towards the end of the close, the bulls have taken a bit of control and
indicate some sort of strength.
A hammer candlestick isn’t technically confirmed until the next candlestick closes and sets a higher low. This displays an attraction in price and signals buyers to place orders to increase the price and make money. As each candle after the hammer candle sets higher lows, it shows a clear indication of buying power, as the trend continues, this will obviously suggest to current sellers that the hammer candlestick has shown confirmation and the sellers may reconsider and buy back into the pair rather than sell.
If you, as a trader are looking to optimise the entry following a hammer candle, it would be wise to set buy limit or buy stop orders. Market execution orders do not always give the best entry and by not getting the best entry you expose yourself to greater risk.
In addition to the above, another sign of confirmation or security in the validity of the candlestick is to notice that the tail or wick should be at least 2x greater than the size of the body.
Hammer candlesticks are more effective from the H1, H4 and 1D timeframes. The lower the timeframe the more the noise impacts price and doesn’t actually indicate candlestick signals.
Hanging Man
I find the safest way to trading a hanging man signal is to ensure you’re trading it as a reversal. A hanging man candlestick represents a large sell off early on during that time period, decreasing the price and in turn creating quite a noticeable tail. Buyers towards the end of the time frame manage to pull back the price/>
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