Thursday, August 20, 2009

Reversal Patterns (Japanese Candlesticks)


Prior Trend
For a pattern to qualify as a reversal pattern, there should be a prior trend to reverse. Bullish reversals require a preceding downtrend and bearish reversals require a prior uptrend.

Hammer & Hanging Man
The hammer & hanging man look exactly alike but have totally different meaning depending on past price action. Both have little bodies (black or white), long lower shadows and short or absent upper shadows.

The hammer is a bullish trend reversal pattern that forms during a downtrend.

Criteria
  • The long shadow is about two or three times of the real body.
  • Little or no upper shadow.
  • The real body is at the upper end of the trading range.
  • The color of the real body is not important.
The hanging man is a bearish reversal pattern that can also mark a top or strong resistance level.

Criteria
  • The long lower shadow is about two or three times of the real body.
  • Little or no upper shadow.
  • The real body is ath the upper end of the trading range.
  • The color is not important.
Inverted Hammer & Shooting Star

The inverted hammer occurs when price has been falling suggests the possibility of reversal.

The shooting star is a bearish reversal pattern occurs when price has been rising.

Tags:











Bookmark and Share

1 comments:

kelly on August 16, 2010 at 2:37 AM said...

Earning money online never been this easy and transparent. You would find great tips on how to make that dream amount every month. So go ahead and click here for more details and open floodgates to your online income. All the best.

Post a Comment

 

The Forex Indicators © 2008 Business Ads Ready is Designed by Ipiet Supported by Tadpole's Notez