Scott Nathaniel49 Morris

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What are candlestick patterns in forex?

Candlestick patterns are visual representations of price action that help traders understand market psychology. Each candlestick shows the open, high, low, and close price for a specific period. Popular reversal patterns include the hammer, shooting star, engulfing patterns, and doji. For example, a hammer with a long lower wick after a downtrend may signal a bullish reversal, while a bearish engulfing pattern after an uptrend often suggests selling pressure. Continuation patterns, such as three white soldiers or rising three methods, indicate trend strength. Traders use candlestick patterns to time entries and exits, often combining them with support and resistance zones for accuracy. While candlestick patterns are powerful, they are not always reliable in isolation, and false signals occur in volatile markets. To increase effectiveness, many traders combine candlestick analysis with indicators like RSI, MACD, or moving averages. Understanding candlestick psychology helps traders anticipate market moves with better confidence.