Top 10 Candlestick Patterns For Swing Trading

There are many candlestick patterns that you can use for  trading but you don’t really need to know all of them unless you really want to confuse yourself.

What you need is to study and know only a few candlestick patterns that are worth knowing.

As a trader, it is also important to know what kind of forces are at work to make these patterns form.


As a swing trading (or aspiring swing trader), it is in your best interest to know these candlestick patterns that are listed here.

BULLISH CANDLESTICK PATTERNS

The 5 bullish reversal candlestick patterns are :

  • Bullish Engulfing
  • Hammer(the colour can be both green or red, it does not really matter)
  • Bearish Hammer(some traders call it the pregnant candlestick pattern…it is obvious why :) )
  • Piercing
  • Doji

Continue to read below for the description of each of the bullish candlesticks above and also find out  how each candlestick pattern is formed and how this information can help you trade successfully with candlesticks.

 

 

 

 

 

 

(1) Bullish Engulfing Candlestick Pattern

The bullish engulfing candlestick pattern consists of 2 candles. The first candle is a narrow range candle closes red.

What this means is that there are lot more sellers than the buyers but because it is such a narrow range candle, it also tells you that the sellers are not that aggressive.

The second candle is a bullish wide range candle that engulfs the body of the first candlestick and closes  near the top of the range.

What this means for this second candle is that that the market forces have changed:they buyers have overcome the sellers and have taken control of this currency pair.

If you see a bullish engulfing candlestick pattern in a level of support, fibs or pivots, then these can provide a powerful reversal!

 

(2) Bullish Hammer

The bullish hammer is a single candle. Note that, this candle can be either red or green.

This is how the candle forms: when the currency pair opened, at some point, the sellers took control of the currency pair and pushed it lower.

However, eventually, the buyers started buying and pushing back price up and it closes higher than it opened or a bit lower than its opening.

If you see a bullish harami candlestick pattern in a level of support, fibs or pivots, then these can provide a powerful reversal!

 

(3) Bullish Harami

The bullish harami is a 2 candle pattern. The first candle is is a red candle, which would have a wide range.

The second candle would be a green narrow range candle.

What this this tell you about the forces in the market?

When you see the bullish harami candlestick pattern,  it simply tells you that the downward or (bearish) momentum has stopped or slowed.

Why? Because on the first candle, the sellers were seriously in control. Then on the 2nd candle, a bullish candle, the buyers managed to defeat the sellers and at least got the candle in green.

If you see a bullish harami pattern in a level of support, fibs or pivots, then these can provide a powerful reversal!

 

(4) Piercing

The piercing pattern is a two candle reversal pattern. The firs candlestick is a red one followed by a green candlestick.

Both candlesticks are roughly equal and of the same wide range.

What does this mean?

It means that in the first candle, the sellers were really in control. When the next candle forms, instead of going down, the opposite happens, it goes up. The candlestick is green! This means the the buyers (or you can also say the bulls!) came in with such ferocity and pushed the candlestick price to close more than (or at least) halfway up the range of the previous red candlestick.

If you see a Piercing candlestick pattern in level of support, fibs or pivots, then these can provide a powerful reversal!

 

(5) Bullish Doji

Doji is without doubt, the most popular candlestick pattern. This is what happens in a doji candle: the candle open up and goes pretty much nowhere and closes at or near to its opening price. The doji candlestick can both be green or red.

What does this mean then?

It means that the market forces of buyers and sellers are undecided.  It shows a period of indecision by traders questioning the current trend.

And if the current trend was bearish, the formation of a doji candle would trigger an uptrend.

If you see a doji candle in a level of support, fibs, or pivots, then these can provide a powerful reversal as well!

 

BEARISH CANDLESTICK PATTERNS

Now for Bearish candlesticks:

  • Bearish Engulfing
  • Shooting Star (the exact opposite of Bullish Hammer…as usual, the colour of this candlestick can be alos green)
  • Bearish Harami(looks like a pregnant woman…the big green candlestick is the mother candle and the littlr red inside bar(candlestick) is the baby candle)
  • Dark Cloud Cover
  • Doji

 

 

 

 

 

 

What you will notice with the bearish candlestick patterns (if you haven’t yet!) is that they are completely opposite of the bullish candlestick patterns given above.

It is important that you look for these patterns after an upward rally and when these candles form, that may signify a possible reversal. As mentioned previously, if these candlestick patterns from around levels of resistance, fibs and pivots, you should pay attention to them!

Ok, let me get into each of these bearish candlestick patterns…

 

(1) Bearish Engulfing Candlestick Pattern

The bearish engulfing candlestick pattern is just the complete opposite of bullish engulfing pattern.

What happens is that the market is in an upward rally (uptrend) then the first green candlestick forms. This candlestick is a narrow range candlestick. Then the 2nd red candlestick forms which has a wide range and its “shadow” completely engulfs the first candlesticks.

What does it mean? What’s going on behind the scenes?

The fact that the first candle had a short range meant that the bulls may be possible losing the upward steam. The further confirmation to this was the formation of the 2nd red candlestick.

When you see a bearish engulfing pattern in levels of resistance, fibs or pivots, then these can provide powerful reversal!

 

(2) Shooting Star

This is generally a red candle that looks like a shooting star: a short head and a long tail. Note that it can both be red or green.  The shooting star is the opposite of bullish hammer.

(3) Bearish Harami (to be updated…)

 

(4) Dark Cloud Cover (to be updated…)

 

(5) Doji (to be updated…)

 

Why You Need Reversal Candlestick Patterns.

  • First, when you use reversal candlestick patterns, you are now using price action to make your trade decisions. Price action is much more better than using a lagging forex indicator to get into a trade.
  • Reversal Candlesticks, when they form around areas of support and resistance  etc…they give you are good trade entry confirmation.
  • You can use this reversal candlestick patterns and apply them in any swing trading strategy in this website where it can be used
    as part of its trade entry rules.
  • These reversal candlestick patterns when used in larger timeframes like the 1hr and upwards, give much more accurate signals.

Are Reversal Candlesticks Accurate?

No. Like all things in forex trading, nothing is 100% accurate. You see, reversal candlestick, the reason they are useful is that certain behaviour in the forex market price produces certain candlestick patterns. Now, if you go and do a historical analysis of these candlesticks, you tend to see a picture immerging regarding these candlesticks. You tend to see things like: “ok, when this candlestick formed at this level(maybe support or resistance level), price rose dramatically, or price fell”.

So then what happens is that you start to get a picture and feel of what to expect every time you see such a candlestick pattern forming. This is where reversal candleticks or other candlestick patterns become useful to forex swing traders.

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