Basic Candlestick Patterns

Basic Candlestick Patterns Guide [2019]

Do you struggle to trade the markets with basic candlestick patterns? If so, you’re in the right place!

Basic Candlestick Patterns

In my trading lesson today, I will cover basic candlestick patters, which is very important to your trading success.

Having a solid Forex trading education on basic candlestick patterns, is the starting point for any successful trader.

I will be sharing with you today the basic candlestick patterns I use with my own trading on a daily basis.

The basic candlestick patterns I will cover are-

  • The structure of a candlestick
  • The doji candlestick
  • The pin bar (known also as the hammer)
  • Two candle reversal (known as railway tracks)
  • Indecision candlesticks (known also as inside candles)

The Structure of a Candlestick

The structure of a candlestick is known by the high-low, open-close and the candle body.

How a candle is formed with basic candlestick patterns:

In my trading lesson today, I will first look at how a candlestick is formed. With the structure of a candle, you will always have a open to the close, high to the low and a body. 

Either from a bullish or bearish candlestick, the only difference would be. Where a candle opens and closes will determine the candle direction and colour.

If there is a bullish closed candle, this will always close higher then the open price.

The opposite will be true for a bearish candle where this will close lower then the open price.

The high to low structure will be how far a candle moved. Within the session to the highest point and the lowest point of the candle.

The body will be the colour of the closed direction and how far in pips price moved within the open session.

Below is a picture to demonstrate this, with how a bullish or a bearish candle would look on a price chart.

With showing the open, close, low, high and the body of the candlestick.

bullish and bearish candlestick
Structure of a Candlestick

Doji Candlestick Pattern

A doji candlestick is known to be a indecision candle. On many occasions this is when there is a tight range, with a fight between the bulls and the bears.

Even though a Doji candlestick can represent a tight ranged fight between the bulls and the bears.

Many occasions a Doji appearing after a long extended move higher or lower. Can give a reversal pattern known as the Doji star.

On the attached pictures below of the Doji, you will see how a Doji star would look  as well.

Best Way To Trade Doji’s with my basic candlestick patterns:

See the Doji on the pictures below, they do not give any firm direction of the market.

It is always best to trade a Doji from reversal points within the market. When combined with a solid level of support or resistance. 

These are the bearish and bullish Doji star candlestick patterns to trade.

A entry would always be taken on the break of the high or low of the Doji to avoid being trapped into a false breakout.

Check out what a Doji looks like on a price chart…

basic candlestick patterns with a doji on a price chart
Doji Single

Check out what a Bearish Doji Star looks like on a price chart…

basic candlestick patterns with a bearish doji star on a price chart
Bearish Doji Star

Check out what a Bullish Doji Star looks like on a price chart…

basic candlestick patterns with a Bullish doji start on a price chart
Bullish Doji Star

The Pin Bar Or Hammer Candlestick

Next I will cover my favourite of the basic candlestick patterns with the pin bar.

The Pin bar candlestick pattern, will show when price is reversed dramatically from a level of support or resistance.

This shows a strength of either the bulls or bears within the market.

A pin bar will show the rejection of a move higher or lower coming off a level of support or resistance.

On most occasions this will be when the market is demonstrating a fake break.

When price is driven through a level to be reversed back above or below again closing as a pin bar.

The pin bar must be mastered with my basic candlestick patterns:

A pin bar is easy to spot on any given chart, but they are not as easy to master.

Trades taken off any pin bar should be taken from the break of the high or low of the pin bar.

Some examples of how a good pin bar should look:

Check out what a Bearish Hammer (Pin Bar) looks like on a price chart…

basic candlestick patterns with a bearish hammer on a price chart
Bearish Hammer (Pin Bar)

Check out what a Bullish Hammer (Pin Bar) looks like on a price chart…

basic candlestick patterns with a bullish hammer on a price chart
Bullish Hammer (Pin Bar)

The Two Candlestick Reversal

A two candle reversal, also known as “railway tracks” is very similar to the pin bar. Instead of showing the rejection of a level in one candle this is demonstrated over two.

With the two candle reversal, it has the same makeup as the pin bar. The only difference is it is made up of two candles.

With a bearish signal you will have one bullish candle followed by a bearish candle generally of the same size.

This would show a rejection of higher prices and once again could show a fake break of a level of resistance. 

Bullish Reversal with my basic candlestick patterns:

The opposite is true of a bullish reversal, with a bearish candle followed by a bullish candle. Only difference will be price would be rejecting a level of support.

As like a pin bar most traders will take a entry on the break of the highest or lowest point of the two candle reversal.

Below are some examples of what a two candle reversal pattern should look like. 

Check out what a Bearish Two Candle Reversal looks like on a price chart…

bearish two candle reversal on a price chart
Bearish Two Candle Reversal

Check out what a Bullish Two Candle Reversal looks like on a price chart…

bullish two candle reversal on a price chart
Bearish Two Candle Reversal

Indecision Candles (Inside Candles)

In this final basic candlestick patterns trading lesson I’m going to cover the inside candle. Which is one of my favourite candles to catch trend continuation moves.

The indecision candle, or more known as the inside candle will show exactly what it is called. With indecision within market between the bulls and the bears.

Using indecision candles as reversals:

With an indecision candlestick pattern, which shows the indecision between the bulls and the bears with no real winner between the two.

It is very common to find more than one in an area around a level of a strong support or resistance. 

This does show a trader there is a possible strong level on the chart. The key here is to wait for the breakout or reversal to be confident of the trading direction.

Continuation Signals

Indecision candles can also be traded as continuation signals.

These will appear after a strong move in one direction, with price pausing for a breather.

As the struggle between the bulls and bears happen before the continuation in the trend direction again. 

Below are some pictures showing the indecision candlestick as a reversal and continuation pattern.

Check out what the Inside candle continuation looks like on a price chart…

nside candles as a continuation on a price chart
Continuation Pattern

Check out what the Inside candle reversal looks like on a price chart…

basic candlestick patterns with an inside candle as a reversal on a price chart
Reversal Pattern

Final thoughts with my basic candlestick patterns trading lesson:

You have discovered some of my best basic candlestick patterns you can use today with your own trading.

Just remember the candles on their own does not give you a trade setup.

You will need to add into the analysis support and resistance trading which you can learn more in another trading lesson here.

As usual if you have any questions or comments leave them in the comment box below.

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