Traders often use reversal patterns to make trading decisions. As the name suggests, reversal candlestick patterns are price charts that give signals regarding reversals, aka price reversals. These patterns signal price changes, from a bullish trend to a bearish one or vice versa.
During an uptrend, reversal candlestick patterns provide a reversal signal from bullish to bearish. Conversely, in a downtrend, reversal candlestick patterns signal a reversal from bearish to bullish.
Reversal candlestick patterns are considered important by traders because they can potentially provide maximum profits. When a reversal candlestick pattern appears in an uptrend market, traders open sell with a stop loss above the high. And if it appears during a downtrend market, traders open buy with a stop loss below the low candlestick.
There are various reversal patterns, including single candlesticks such as hammer and hanging man, morubozu, inverted hammer and shooting star, and pin bar. There are dual candlesticks such as engulfing candles and tweezer tops and bottoms, triple candle reversals such as three white soldiers and black crows, and three inside up and down.
However, all types of reversal patterns are just methods of identifying possible reversals, but this does not mean that after the pattern appears the price will definitely reverse, but it is only an indication or signal that might occur.
Apart from the reversal patterns already mentioned, there is a candlestick pattern that is considered a trend continuation signal, which is called the three-line strike pattern.
This candlestick pattern begins with three consecutive candles, either bullish or bearish, which is then followed by the appearance of one larger reversal candlestick which shows a spike in movement with a larger candlestick body than the three. However, this trend continuation pattern in some cases may be a reversal signal if it occurs at the peak or valley of the trend. Read here to read more this topic.
Studying trend continuation patterns and reversal patterns can help traders when trading and make trading decisions based on risk tolerance. However, the emergence of a reversal pattern and continuation of the trend does not guarantee that traders will make a profit because apart from determining the right entry point, the exit point is also very important and this is what determines the final result of a trade.
During an uptrend, reversal candlestick patterns provide a reversal signal from bullish to bearish. Conversely, in a downtrend, reversal candlestick patterns signal a reversal from bearish to bullish.
Reversal candlestick patterns are considered important by traders because they can potentially provide maximum profits. When a reversal candlestick pattern appears in an uptrend market, traders open sell with a stop loss above the high. And if it appears during a downtrend market, traders open buy with a stop loss below the low candlestick.
There are various reversal patterns, including single candlesticks such as hammer and hanging man, morubozu, inverted hammer and shooting star, and pin bar. There are dual candlesticks such as engulfing candles and tweezer tops and bottoms, triple candle reversals such as three white soldiers and black crows, and three inside up and down.
However, all types of reversal patterns are just methods of identifying possible reversals, but this does not mean that after the pattern appears the price will definitely reverse, but it is only an indication or signal that might occur.
Apart from the reversal patterns already mentioned, there is a candlestick pattern that is considered a trend continuation signal, which is called the three-line strike pattern.
This candlestick pattern begins with three consecutive candles, either bullish or bearish, which is then followed by the appearance of one larger reversal candlestick which shows a spike in movement with a larger candlestick body than the three. However, this trend continuation pattern in some cases may be a reversal signal if it occurs at the peak or valley of the trend. Read here to read more this topic.
Studying trend continuation patterns and reversal patterns can help traders when trading and make trading decisions based on risk tolerance. However, the emergence of a reversal pattern and continuation of the trend does not guarantee that traders will make a profit because apart from determining the right entry point, the exit point is also very important and this is what determines the final result of a trade.
