Posted By: Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
- The evening and morning star candlestick patterns occur at the end of upwards/downward trends respectively and tend to indicate reversal patterns.
- The names come from the star shaped formation of the arrangement.
- As you can see from the image below, the first candlestick is in the direction of the trend, followed by a bullish or bearish candle with a small body. The third candlestick is seen in the direction of the reversal, ideally closing passed the halfway point of the first candlestick.
- Trading this candlestick pattern will require a confirmation candle in the direction of the respective reversal – for example, traders will look for a bearish candle after the evening star.
- A bullish or bearish engulfing candlestick pattern may indicate reversal patterns.
- A bullish engulfing candlestick formation shows bulls outweigh bears. As the pattern below shows, the green body (bulls) covers completely the first candlestick (bears).
- A bearish engulfing candlestick pattern is small green (or bullish) candle followed by a larger red (bearish) candle immersing the small green candle.
- The Doji candlestick chart pattern is associated with indecision in the market of the underlying asset. This could mean potential reversal of the current trend or consolidation.
- This pattern can occur at the top of an uptrend, bottom of a downtrend, or in the middle of a trend.
- The candlestick itself has an extremely small body centered between a long upper and lower wick.
More to follow and in between try out some of these formations on our FX demo below.
Futures Trading Levels
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