that is totally encompassed by the first. The bearish reversal pattern forecasts that the current bullish move will be reversed into a bearish direction. In the following chart example, I will illustrate five reversal trades for you. After advancing from 68 to 91 in about two weeks, AT T (T) formed an evening star (red oval). A close above the midpoint might qualify as a reversal, but would not be considered as bearish. The doji also means the market has gone from a yang or ying quality to neutral state. This increases the reliability of weekly trading strategy the pattern. Chart patterns can represent a specific attitude of the market participants towards a currency pair. Top 5 Candlestick Patterns This analysis relies on the work of Thomas Bulkowski, who built performance rankings for candlestick patterns in his 2008 book, "Encyclopedia of Candlestick Charts." He offers statistics for two kinds of expected pattern outcomes: reversal and continuation.
This is when you would want to initiate a trade to the short side. After an advance that was punctuated by a long white candlestick, Chevron (CHV) formed a shooting star candlestick above 90 (red oval). At the top of the last shoulder we see another Hanging Man pattern, which this time gets confirmed and completed. The intensity of the selling drives prices below the midpoint of the white candlestick's body. Bearish confirmation came the next day with a sharp decline. The image above is the H4 chart of the USD/JPY Forex pair for Sep, 2016. When the price breaks the Neck Line, you get a reversal trading signal.