In the last posting I talk about some of the most common candlesticks pattern. Here I would like to talk a few more common candlestick combination. Hope this will help out everyone who starts learning forex. The photos below are screen capture from my charting software. Please feel free to leave your comments.
Star position
Star position is where a candlestick with small body appears gap up (or gap down) from the previous candlestick. The first candlestick should have large body, while the second candlestick should have fairly small body. The second candlestick can be a Doji, Hammer/Inverted hammer, hanging man or shooting star.
The star position usually means there is potential reversal happening.
Harami Position (孕み)
Harami, means “pregnant” in Japanese. In this position, the second candle is fully ‘enclosed’ in the fist candle. The first candle should have fairly large body, and the second candle body (and usually the shadow too) should be within the body of the first candle.
Harami used to confirm a reversal that is happening. The color of both candlesticks should not be important. The color can be in any of the 4 combination.
Engulfing
Engulfing is a pattern where the second candle fully ‘engulfs’ the first candle. In a bullish engulfing, the open of the second candle is lower than the low of first candle, while the close of the second candle is higher than the high first candle.
In a bearish engulfing, the open of the second candle is higher than the high of first candle, and the close of the second candle is lower than the low of the first candle.
Usually engulfing means a potential reversal is happening. Confirmation with indicators and subsequent candles are required on the reversal.
Piercing / dark Cloud Over
These 2 are also potential reversal pattern. A piercing is pattern with 2 candles, the open of second candle is lower than the low of first candle, and the close of the second candle should be above the ½ body of the first candle.
In the dark-cloud-over formation, the open of the second candle should be higher than the high of the first candle, and the close of the second candle should be lower than half of body of the first candle.
