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Forex Candlestick Charts: Reversals and Blending

Aug 18, 2007
If you have ever used Forex candlestick charts, you will certainly recognize them for the helpful tools they are, especially when the foreign exchange market is concerned.

While they are not as easy to read as bar charts, they give you more information about what is actually going on, providing not just the highs and lows for an entry, but the opening and closing prices as well. You will also be able to see how these prices fit in with trends from the surrounding time period.

Once you have learned to read a Forex candlestick chart, you will begin to parse universal patterns that will help you take in a situation at a glance. One of the benefits of the candlestick chart is it does the work of at least two charts, saving the time you will spend shuffling documents.

One thing that you will learn after extensive use of Forex candlestick charts is how versatile they are. The real value of candlestick charts comes not with single entries, though they might record important specific information, but when you view them together and learn to recognize and predict trends.

When you are looking for candlestick patterns, you are looking at one or more candlesticks that are "blended" together to form one.

To produce a pattern, you will use the open price of the first candle stick, the high and low of the pattern and the closing price of the last candlestick. Not only does this give you a good summation of the period, it will also give you an excellent visual image of the trend as well.

In technical analysis, one of the most important goals is to identify changes in price action. Understanding reversals is one of the most important things that you can know, and Forex candlestick chart patterns can help calculate bullish and bearish reversals.

They concentrate a great deal on the psychology of the foreign exchange market, and due to usually being categorized over several different time periods, they will provide viewers with a good display of the market situation.

A few famous bullish reversal patterns include the ones called "Three Inside Up" and "Morning Doji Star" for example; these names are derived from the original Japanese and are an easy way to keep track of what is going on.

Similarly, "Dark Cloud Cover" and "Evening Doji Star" represent strong bearish reversals.

There is a lot to learn with regards to really getting a good grip on the information provided by Forex candlestick charts; with a little bit of practice, you can take advantage of all the benefits that these useful tools will provide!
About the Author
Dave Hikade began trading 10 years ago and provides a FREE Forex Trading Newsletter:

http://www.forex-trader-basics.info

More information on Forex Candlestick Charts may be found here:

http://dachsales.com/rec/candlesticks
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