Have you ever wondered when is the right time to buy the currency you want? In fact, you have used several technical indicators. But still confused how to read it? It might be time for you to learn the price action patterns shown in candlestick patterns.

The reason candlesticks can be used as a reference in determining whether to open a buy or sell position is because the shape of this chart directly represents the price movement and trading volume in the market. However, just look at the candles that form.

Candlestick pattern to open a buy position

So what is a candlestick pattern suitable for a buy position signal? Here’s the discussion:

1. Bullish Pin Bar

Bullish pin bar is a candlestick pattern indicating that reversal pattern. This candlestick is shaped like a hammer with a long bottom tail and a small chart above it. More or less it looks like this:

Figure 1: Example of Bullish Pin Bar (Source: MIFX)

This chart indicates that the power of the bulls (buyers) is starting to take over the transaction. Therefore, this candlestick signal will be more accurate if:

  1. Body size does not exceed 50% of all candlesticks.
  2. The size of the tail above the candle is small or nonexistent.
  3. The smaller the size of the device, the more The more accurate the signal will be.

If this pattern appears on your trading application screen and other technical indicators support it, you can open a buy position at the closing price level.

2. Bullish Engulfing

Bullish engulfing is a pattern consisting of two candles where the second candle is larger than the first. so that the second candle appears to “eat” the first candle.

Here’s a picture of this pattern:

Bullish engulfing can be a buy signal if:

  1. located behind the downtrend
  2. The lowest price of the second candle is lower than the first. but closes at a higher price than the previous candle to make the size appear larger.

Although generally considered to have a higher level of accuracy. same as the previous pattern You still use other technical indicators to confirm.

3. Bull Drill

The shape of the bullish bullish candlestick pattern is almost similar to the bullish swallow. the difference is The height of the second candle is only half the height of the first candle. The bull drill pattern can be used as a reference for long positions if:

  1. This pattern is preceded by a downtrend. If a bullish penetration is found in the rising price trend. This means that there will be a change in the price trend but is insignificant.
  2. The second candlestick occurs at the opening of the next forex trading session or the next day. And there is a price gap between the closing and opening price between the first and the second candlestick.
  3. The size of the second candlestick is at least half of the first candlestick. This indicates that during the trading session, the bulls (buyers) began to take over the market.)

Unfortunately, Bullish Piercing is a fairly common pattern in the stock market. But this rarely happens in the Forex market as the Forex market tends to be more liquid than stocks. Therefore, it is rare to find a gap between two consecutive candles.

Here is an example of a bull market shot:

Bull Drill Bentuk
Figure 3: Bullish Piercing (Source: DailyFX)

4. Morning Star

similar to the three formats above. candlestick with pattern Venus It is a reversal pattern from a bear market to a bull market. This pattern consists of 3 candles A, B and C, where A is red or black (bearish), B is a doji and C is a white or green bullish candle.

This pattern is suitable for opening long positions. This is because the presence of a doji in the middle and an uptrend candle at the end indicates that an uptrend that was previously weak in the first candle is taking over.

Here’s an example of a morning star pattern:

Morning Star candlestick example
Figure 4: Morning Star candlestick example (Source: Wikipedia)

The opposite of this pattern is the Night Star pattern, which indicates that the Bears (Sellers) team that lost the previous rally is getting stronger than the Bulls (Buyers).

5. Three White Soldiers

The last form to open a long position is the Three White Soldiers or Three White Knights format as the name implies. This pattern consists of 3 white or green candlesticks A, B and C that appear respectively, although the Three White Soldiers signal a relatively strong reversal in price. But the result of this signal will be more reliable if:

  1. candle preceded by doji candle. As the doji indicates the strength of bulls and bears is equally strong. So the market is uncertain.
  2. The lowest and highest price of candle B is higher than A, the lowest and highest price of C is also higher than B, so the curve pattern is like three steps.
  3. Three candlesticks do not have a tail, or if they have it, the candle’s tail is short only. This condition indicates that the bulls can push the market price to a high level.

Here’s a preview of the three white soldiers:

In contrast to the Three White Soldiers is the Three Black Crows, with three red or black candles lined up like a ladder descending. Like three white soldiers The three black crows are also a strong reversal signal.

How to use candlesticks to open long positions

There are three options you can take to open long positions using candlestick patterns, namely:

  1. Open for purchase when the pattern is not complete. The first method is considered the most risky because you don’t know if the pattern is actually happening or just giving a false signal.
  2. Open buy on breakout at the closing price of the last candle. This second method is somewhat less risky than the first because you know for sure that the candlestick pattern in question has already occurred.
  3. Open a buy when the last candle price breaks the high. The lowest risk way is to simply open a long position when a real breakout occurs on the third candle. Therefore, the pattern is officially formed and it is most likely that the price will move in the expected direction.

Those are some of the candlestick patterns that you can use to open a buy position. You have to keep in mind that although the experts judge the signals from the above candlesticks to be quite accurate. But it is better for you to use more technical indicators.


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