In investing in general and investing in the foreign exchange market in particular, grasping the rules as well as classic reversal patterns plays an important role in helping investors orient and make decisions. right investment. To be able to recognize as well as have a preliminary grasp of the classic reversal patterns in forex trading, do not ignore our information below.
Why should investors know the classic reversal patterns?
When participating in transactions on the Forex market, investors require certain knowledge and skills of forex technical analysis to be able to reason and make decisions to buy and sell at the right time. corpse.
Reversal patterns, also known as Japanese candlestick patterns, are one of the important tools to help investors perform technical analysis of the forex market effectively. Thanks to this tool, investors can predict the market’s reversal (from bullish to bearish and vice versa). Correspondingly, within the scope of sharing below, we summarize two groups of classic reversal patterns that are widely recognized by members of the investment world.
Bullish reversal candlestick pattern
Hammer pattern: Is a single candlestick pattern with the identification of a very short or no upper shadow, the lower shadow is 2 to 3 times longer than the real body, the body is small, and can be a bullish or bearish candle. Through the Hammer pattern, investors can identify the rejection of lower prices, the weakening of the market’s selling force and the market’s reversal trend, thereby making the right investment decisions.
Dragonfly Doji pattern: Also a single candlestick pattern with the characteristic identification of no real body, the same opening and closing prices, the same as the highest price in the session, and a long lower shadow. Through the Dragonfly Doji model, investors know the buying power at the moment (the longer the lower shadow, the stronger the buying power) as well as the possibility of a market reversal.
Bullish Engulfing Pattern: A double candlestick pattern with the first candle being a bearish candle, the second candle being a bullish candle, the second candle is always higher than the first candle. In case the Bullish Engulfing pattern appears in a downtrend, investors are warned that the market trend may reverse into an uptrend.
Tweezer Bottom Pattern: A double candlestick pattern with tree characteristics, so the first candle is a bearish candle with a long lower tail and a small body; The second candle is a bullish candle, with a long lower tail, the closing price is equal to the opening price of the first candle. Through the Tweezer Bottom model, investors know if the sellers are having difficulty when twice trying to push the market down but failed and the buyers have the advantage.
Bearish reversal candlestick pattern
Shooting Star pattern: With the feature that the upper shadow is twice or three times as long as the real body, the lower shadow is almost absent or very short, the candle is green or red. Through the Shooting Star pattern, investors can identify the trend of the foreign exchange market, specifically: After a strong uptrend of the market, a new candle opens and the price moves up strongly. Before the candle closes, the market price is pushed down close to the opening price. Thereby, investors make accurate investment decisions.
Gravestone Doji pattern: Is a single candlestick pattern with no real body, long upper shadow, when the Gravestone Doji pattern appears, investors know that the buyers are trying to control and push the price up at the beginning. session, and at the end of the session, the sellers pulled the price down, pushing the closing price to equal the opening price.
Bearish Engulfing Pattern: A double candlestick pattern, appearing at the top of an uptrend with the characteristics of the first candle being a bullish candle, the second candle being a bearish candle, and the body of the second candle covering the entire first candle. Through Bearish Engulfing, investors know when the sellers overwhelm the buyers, the market plummets.
Tweezer Top pattern: Is a double candlestick pattern with the first candle being a bullish candle, the second candle being a bearish candle, in case the price increase pushes the price up, the closing price is usually close to the highest price area of the day, After the market opens the price drop will appear, pushing the price line down to the vertical.
