Candlestick patterns are frequently applied for the identification of early trend reversal signs.
Here are the three most common reversal formations that you may encounter trading different markets:
1️⃣ - Equal inside bar formation Once the price reaches some important pivot point quite often it tends to form a weak candle with a long rejection wick (long in comparison to the buddy of the candle). In case if the consequent candle's body has the same range, we call that the equal inside bar.
It can be treated as the reversal formation ONLY with additional confirmation. Without an additional trigger, chances will be high that the market will start a sideways movement instead.
2️⃣ - Engulfing candle Once the price reaches some important pivot point quite often it tends to form a weak candle with a long rejection wick (long in comparison to the buddy of the candle). In case if the consequent candle's body engulfs (has a bigger range) the previous candle, we call that the engulfing candle.
By itself, it is a quite strong reversal signal and can be applied as a trigger for opening a trading position.
3️⃣ - Engulfing candle (2X) Sometimes, the engulfing candle engulfs not only the previous candle but also one more preceding one. We also can call such a candle a high momentum candle.
It is considered to be the strongest reversal formation (among these 3) and can be applied as a signal for a trade entry.
❗️Remember that candlestick patterns work only on strong pivots/structure levels. Being formed on random levels, the performance of these formations is relatively low.
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@VasilyTrader, further info on candles would be great. Which style of candles provides more accuracy for successful trading entry. Of course, with your vast knowledge of successful trading all educational information of what works best - especially for intraday trading.
sage216
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Ver much like your info. Been watching it on charts and find it accurate. Please contribute more Thanks
JoinSmartdata
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Thanks clearly explained, how about bottom confirmation signals and methods?
BigBoss88
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Thanks. Yes I didn't think about they structures here. I will try to use it only with structures in future. Thank you!
JaimeD8
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a bit confused about your image. shouldn't the third candle still be green as it finished higher than the second in all scenarios?
Bp_Tradezz
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@JaimeD8 im pretty sure that third candle gapped upwards - thats something that usually happens which is why it looks higher