Forex Candlestick Patterns - Understanding the Trading Chart Patterns

One of the basics of foreign exchange trading and making money from currency trading is learning how to analyse price patterns and trends and making them a basis for your trading decisions. Of course, you cannot just rely on your instincts when you are about to put your hard earned money at stake. One of the popular charts used in foreign exchange trading is the forex candlestick chart and learning how to read forex candlestick patterns should be a basic thing you have to learn if you want to make money in the currency market.

Of course, you have to find basis on whether to trade or not and find the right timing to be able to make the most profit out of your venture, which is of course, your very aim in getting into this business.

Candlestick charts are visual representation of the market prices in the currency market and the chart resembles that of a candle, thus the name. If you want to make good trading decisions, here are a few forex candlestick patterns that you may want to familiarize with so you will also be guided on when to trade and when not to.

Firstly, to be able to have a general picture of the currency market movement, you have to understand what is a bull market and a bear market. Patterns in the candlestick chart can be often read as bullish or bearish. Bullish when the market trend is downward moving and bearish when it is up.

For some specific forex candlestick patterns that you might encounter, here are some of them.

Doji - this candlestick pattern is a very popular one. However, this pattern can also trigger confusion among traders and often represents indecision in the currency market. This candlestick pattern is formed when the opening and closing price virtually equal. The said pattern is represented in the candlestick chart as a cross or a plus sign. It can also be shown as an inverted cross.

Hammer - the hammer is another candlestick pattern which is named as such because the candle has a long wick and short body that looks like a hammer. This pattern is formed after a decline and a sign of possible reversal in the currency market.

Engulfing - engulfing is a pattern that can be seen between two candlesticks. As the term suggests, one candlestick 'engulfs' the other as the body of the candle in the previous day is contained in the body of the candle in day 2. In this pattern, the second day opens lower than the other day's closing price and closes higher than the opening price of the previous day as well.

These are just few of the candlestick patterns that you have to master and understand in foreign exchange trading. Other patterns that will help you make wise trading decisions include the harami, piercing, the shooting star and the kickers. There are still other patterns that you have to consider though. Keep in mind also that the forex candles tick patterns are not the only thing you have to consider in your trading decisions. A combination of technical analysis tools will be a wise decision to make your trading a success.

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