As you know, we emphasize on using the strong candlestick patterns a lot because we believe that they are the only real time technical indicators that reflect the markets’ participants mentality.
Candlestick patterns reflect the psychology of the markets’ participants that make the price move and take a special direction. They tell you whether the major markets’ participants want to buy, sell or do nothing.
Therefore, it is crucial to learn the candlestick patterns if you want to have a higher success rate as a trader.
Many of the professional traders use nothing but the candlesticks. Many of them have no indicators on their charts, but candlesticks. The reason is that candlestick patterns work, and if you learn to follow the strong candlestick patterns, you will have a high success rate.
Here, I am showing you some good examples of the strong candlestick patterns that are formed on the markets recently.
If you are new to candlesticks, you can follow the below articles to learn what candlesticks are and how they work: The Language of Japanese Candlesticks
Strong Bearish Engulfing on NZD/USD Daily Chart
Bearish Engulfing candlestick pattern is the strongest bearish pattern that candlesticks form. Of course the strength of the patterns that form depends on a few important factors.
First, the size of the bearish candlestick’s body that has engulfed the previous candlestick(s) is very important. The bigger the bearish candlestick body, the stronger the signal and the higher probability of a strong down movement.
The second factor which is not related to the candlesticks directly, but is the factor that we always consider, is the Bollinger Upper Band breakout. Therefore, both the bearish and also the previous candlesticks, have to break out of the upper band. The stronger the Bollinger Upper Band breakout, the stronger the signal and the higher probability of a strong down move.
If candlesticks’ bodies break above the Bollinger Upper Band, not just the shadows, then the pattern is much stronger.
This factor emphasizes on the bulls (buyers) exhaustion and their decision in selling their positions to collect their profit. It is an important factor that boosts your success rate.
Here is three strong Bearish Engulfing patterns that have formed on NZD/USD daily chart:
Click on the image to see the larger size.
And this is a relatively strong Bearish Engulfing pattern formed on Google’s stock daily chart:
Bullish Engulfing Candlestick Pattern
Bullish Engulfing is the bullish form of Bearish Engulfing candlestick pattern. The same rules and factors that strengthen the Bearish Engulfing pattern are important for Bullish Engulfing pattern as well.
Below, is the example of a too strong Bullish Engulfing pattern on USD/CAD daily chart. Although this candlestick pattern is too strong by itself, still an important factor which is the Bollinger Lower Band breakout is missing here:
Check the charts and find some more examples from the above strong candlestick patterns. Check whether they are strong enough or not and why.