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Candlestick Types ✫ Forex Training For Beginners
candlestick analysis and price action important candlestick types part one in previous lessons we talked about moving averages and some other technical indicators that can be used as building blocks for simple trading strategies what these indicators all have in common is that they are derived from calculations based upon historical prices in this lesson we are going to talk about the price itself the Japanese candlesticks that you see in your trading screen can act as more powerfully predictive raw materials helping you to anticipate what is likely to happen next in course two we explained how Japanese candlesticks are formed the area between the open and closed is the real body and when the price high and or low is beyond the real body that area is shown by a vertical line called the shadow hundreds of years ago the Japanese rice traders who used Candlestick charting notice that some types of candlesticks which could be identified by their real body and wick patterns had some predictive power they also noticed that certain groups of candlesticks had predictive power this is not surprising when we consider that a higher time frame candle is just a combination of several consecutive candles from a lower timeframe the old Japanese analysts put a name to just about every type of candle you could possibly imagine for now though we are going to concentrate on identifying the five most important types of candlesticks that every trader needs to be able to recognize the pin bar number one the pin bar also known as a hammer the pin bar has a very small real body that is close to either its high or low and a long shadow that sticks out on one side it is formed whenever the price opens moves away in one direction then returns quickly to the level that started at the pin bar traditionally signifies an immediate move in the direction opposite to the way the shadow is pointing especially where the shadow pokes out beyond the highs or lows of preceding candles this is because the long shadow is believed to show a sharp rejection of the price from support and resistance which should usually continue for a while the inside bar number to the inside bar this is a bar that is contained within the range of the candle just before it this means that its high is lower than the previous candle psy and it's low is higher than the previous candles low the inside bar is not defined by its real body or shadows it traditionally signifies a period of market indecision ie consolidation the breakout of which can be profitably bought or sold this belief is because the price was not able to move beyond the confines of the previous candles high and low so when it finally makes its move it should be strong the outside bar number three the outside bar this is a bar that exceeds both the eye and the low of the range of the candle just before it this means that it's high is higher than the previous candle sigh and it's low is lower than the previous candles low the outside bar is not defined by its real body your shadow traditionally the significance of the outside bar depends upon where the bar closest if close to its eye then it's bullish if close to its low then its bearish if it close as close to the middle of its range then it signifies a combination of increasing volatility and indecision showing traders that it is probably wise to stay out of the market right now we'll end this lesson here but don't worry in the next lesson we will talk about the other two types of candles that you need to be able to recognize and some useful information about how candle locations and wider context can help you to predict price movements you