Trend Trading Report Part V - Complex Candlestick Patterns

In this Part of the Trend Trading Report we'll cover complex candlestick patterns, what do they look like, what are they meant to communicate, and recommendations for their use.

Review: Wikipedia defines a candlestick pattern as "a movement in prices shown graphically on a candlestick chart that some believe can predict a particular market movement. The recognition of the pattern is subjective and programs that are used for charting have to rely on predefined rules to match the patterns. there are 42 recognized patterns that can be split into simple and complex patterns."

The following patterns are referred to as complex patterns. In all cases below, these complex patterns are multiple candles in different colors and shapes. Note: a black candle/black body is bearish and candlesticks on some currency pair charts may use other colors (e.g. red). A white candle/white body is bullish and candlesticks on some currency pair charts may use other colors (e.g. green).

Complex Candlestick Patterns

Recommended Use Of Candlestick Patterns

Use of the above candlestick patterns is complicated by the fact that there are so many different patterns. If I were buying and selling currency pairs every day I might have memorized these various candlestick patters, but I don't trade currency pairs every day. Therefore, I recommend focusing on up to 5 of your favorite candlestick patterns. Get to know them well, and use them when they appear.

When trading currency pairs live, it's somewhat cumbersome to have to study all the candlestick patterns to remember what they are and interpret what they mean. My personal preference is the following:

1. Pick a small set of candlestick patterns that are very effective, and stick to them. 2. Focus more on chart patterns for predicting what price-action will do next. Chart patterns will be covered in depth in the next three posts.

End of Part V

Part VI of this report will be released in about one week. The topic is "Introduction To Chart Patterns"

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