Top 10 Candlestick Patterns To Trade the Markets
If you want to learn how to trade the markets, then you will no doubt want to learn about some of the top selling patterns on the Forex markets. What are these top selling patterns and where can you find them? You’ll find some of them quite easily as we go through this article. This is the first in a series of articles on where to find and trade the top selling stock indicators that will have you making money day in and day out with the markets.
Let’s start with a top ten minute candle pattern. The top of any candle pattern has a color that has the highest volume over a small period of time. The middle of the pattern tends to have lower volume. Finally, the bottom has little or no volume at all. We like to find these top and center frames to trade the markets with.
Next we’ll discuss reversal patterns. These are characterized by a falling candle that quickly bounces back up to the open or closing price. As an example, if a candlestick shows a bullish pattern of the top being followed by a breakout to the downside, you are looking at a reversal. With a bearish pattern like the break-top, you would look for a breakout to the upside and the replacement as the pattern retakes its way back to the top.
Moving on from these reversals, we have the bullish and the bearish reversals. A bullish reversal is characterized by a candlestick that reverses from the upper Bollinger band to lower Bollinger band. A bearish pattern is just the opposite of a bullish pattern. The upper Bollinger band is rising, while the lower Bollinger band is falling. Either one of these patterns is a good buy and a sell signal in our opinion.
A third popular pattern is the moving top. This is closely similar to the bullish top in that it is characterized by moving candles that have either risen or fallen to the opening or closing price. The difference is that the sellers do not have to worry about being oversold and the buyers have enough buying power to hold the candle until the price retakes the top of the range. At this point, the buyers have outpaced the sellers and now this top of the market level has established a new high. These candlesticks offer excellent opportunities to trade a top reversal.
The fourth pattern is known as the zero spread. Unlike our bullish candlestick patterns, this pattern is actually considered bullish in many settings. In a sense, this is what a top retracement would look like under this setting. Basically, the market will remain divided in expectation between the opening and the closing price. Should the price break out of this pattern, look for a new high with a large reversal candlestick.
The last bullish candlestick pattern we will discuss is called the closing candle retracement. This pattern is characterized by the closing price being broken down from the previous high. Typically, sellers do not want to close above their previous high, so they wait for the price to get back below the previous high before they sell. As such, you would typically find these patterns from times when sellers have grabbed some strong support. The downside potential here is huge, so it is not something you would want to miss. Watch for this top level to get in before the market reverses and you can take advantage of this consolidation.
It should be easy to see how these patterns make the top ten in a technical analysis course. There are definitely more than one type of bullish candlestick pattern, but if you only study the most common versions, you will soon start to see trends and signals that you can begin to use to make profitable trades. Do not become a guru, but instead start using these patterns as guidelines and build your own system based on them. You can always go back and add or subtract from these top ten picks as new developments occur.