In the world of forex trading, understanding patterns in forex is crucial for making informed decisions. At GVD Markets, we believe that mastering candlestick patterns in forex can significantly enhance your trading strategy. Today, we’re diving into three powerful reversal patterns that every forex trader should know: the Bullish Piercing Pattern, the Dark Cloud Cover Pattern, and the Bullish and Bearish Engulfing Patterns. These patterns can help you identify potential trend reversals and make more profitable trades.
Bullish piercing pattern in forex
A double candlestick reversal signal with a bullish pattern is known as bullish piercing pattern. The first candlestick is a long bearish candle. The other one is a long bullish candle that has closed above the midpoint of the first candle. Here’s how the bullish piercing pattern forms.
The first session is in total bear control. They push the price down and the session closes at its low. The next session is the complete opposite. Bulls are in charge of the sessions open until the close. The higher the price gets, the stronger the reversal signal will be. Take note that the bull candlesticks needs to be with long real bodies.
This is not a bullish piercing pattern because there is no real change in the market psychology, We really want to see a strong bear pressure followed by a strong bullish reply as this is a bullish reversal signal, we will only look for it in a downtrend. This is a bullish, piercing pattern as it comes after a strong down move, although it is not a result of an upward trend.
Dark Cloud Cover Pattern in forex
Dark cloud cover is a two candlestick bearish reversal pattern in the first candle that forms a long bull pattern. The other is a long, bare candle that closes below the middle point of the first candle. Here’s how a dark cloud cover forms.
The first session passes in total bull control, and just as the session is about to end, the price reaches close to its high. The next session is the exact opposite as the Bears take charge, pushing the prices down to below the first candlestick minimum point, the signal will get even stronger if the bears manage to push the price lower.
As with the bullish piercing pattern, both of the candlesticks need to have long real bodies as we want to see a complete change in the current market sentiment regarding the bearish reversal signal, we will be on the lookout for an uptrend. This appears to be a dark cloud cover, as if it has formed after a strong move upwards. But this is not a dark cloud cover because it is formed during a downtrend.
Bullish and bearish engulfing patterns in forex
One of the two candlestick bullish reversal signals is the bullish engulfing pattern.
The first of the candlestick is a bearish one. It doesn’t need to have a large real body, but the signal is stronger if it has.
The second is a long bullish candle that completely engulfs the first candlesticks. Real body Note that both candlesticks can have small shadows as well. The important thing to look at is the real body. This is a very strong reversal signal because not only does the second candlestick show the change in the market player psychology, but also it has managed to close above the previous candlesticks.
Opening price signal gets stronger if the second candle can wrap around more than one of its previous candles, as this is a bullish reversal signal, we will only look for it in a downtrend on the other side of the trend, we can see the opposite signal, which is called the bearish engulfing pattern. The first candle in the signal is a bullish candlestick and the other one is a long bearish one that completely wraps around the first candle. Remember, the bullish engulfing signal is only valid in a downtrend and the bearish engulfing pattern only in an uptrend.
Final Thought
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These candlestick really mean something, got to learn and know their meaning before doing forex trading