In our previous article we have discussed about important single candlestick patterns that play crucial role in understanding and forecasting the price action in trading once you know the basics of candlestick chart. In this article we will discuss about important double candlestick patterns.
How to trade using double candlestick patterns ?
You can often find candlestick patterns consisting of one green and one red candle on a chart. They are close to each other in a certain way and give a signal that you need to open an up trade or a down trade.
The advantage of such models is that they give leading signals. The accuracy of signals increases when the market clearly shows an upward or downward trend.
Bullish Engulfing:
Bullish Engulfing is a combination where the boundaries of the body of a green candle are larger than the boundaries of the body of a red one. The green candle follows the red one and completely engulfs it. This means that the price of the asset has risen more than it has fallen before. It is a down trend candlestick pattern. As rule, this pattern gives a signal about the end of the downtrend and the beginning of the uptrend.
Bearish Engulfing:
Bearish Engulfing is a combination where the boundaries of the red candle body are larger than the boundaries of the green candle body. The red candle follows the green one and completely covers it. This means that the price of the asset fell more than it had grown before. It is a up trend candlestick pattern. As a rule, this pattern gives a signal about the end of an uptrend and the beginning of a downtrend.
Piercing Pattern:
A Piercing Pattern is a combination where the body of a green candle starts below the body of a red candle. The green candle follows the red one, while the closing price of the green candle is in the area of the upper part of the red candle body. It is a down trend candlestick pattern. As a rule, this pattern gives a signal about the beginning of an uptrend. A Piercing Pattern works similarly to Bullish Engulfing, but it is not as strong. To confirm the signal, analyse other patterns as well.
Dark Cloud Cover:
Dark Cloud Cover is a combination where the red candle opens above the prior bullish green candle. The red candle follows the green one, while the closing price of the red candle is in the area of the lower part of the green candle body. It is a up trend candlestick pattern. As a rule, this pattern gives a signal about the beginning of a downtrend. Dark Cloud Cover works similarly to Bearish Engulfing, but it is not as strong. To confirm the signal, analyze other patterns as well.
Bullish Harami:
Bullish harami is a combination where a long red candle is followed by a shorter green candle. In this case, the body of the green candle does not exceed the boundaries of the red body. It is a down trend candlestick pattern. As a rule, this pattern gives a signal about the beginning of an uptrend. To determine the trend more accurately, analyze the pattern together with a support line.
Bearish Harami:
Bearish harami is a combination where a long green candle is followed by a shorter red candle. In this case, the body of the red candle does not exceed the body boundaries of the green candle. It is a up trend candlestick pattern. As a rule, this pattern gives a signal about the beginning of a downtrend. To determine the trend more accurately, analyze the pattern together with the resistance line.
In our next article we will discuss about important triple candlestick patterns for profitable trading. If you are a beginner trader, you need to follow 4 secret steps to earn profit in trading.
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