In this guide, we will talk about powerful double candlestick patterns that you can use to trade the forex market.
Bullish Engulfing Pattern
The bullish engulfing pattern is a powerful two-candle pattern. For the pattern to be valuable the market must be in a downtrend. The first candle must be red, and the second candle must be green.
The real body of the second candle should be bigger than the real body of the first candle. Traders say that the second candle engulfs the first candle, hence an engulfing pattern. The size of the shadows on either candle does not matter that much.
The above example shows a bullish engulfing pattern spotted on a daily chart. As you can see, there was a clear downtrend before the pattern. The pattern confirmed a reversal in the trend.
Bearish Engulfing Pattern
The bearish engulfing pattern is a powerful two-candle pattern. For the pattern to be valuable the market must be in an uptrend. The first candle must be green, and the second candle must be red.
The real body of the second candle should be bigger than the real body of the first candle. Traders say that the second candle engulfs the first candle, hence an engulfing pattern. The size of the shadows on either candle does not matter that much.
The above example shows a bearish engulfing pattern spotted on a daily chart. As you can see, there was a clear uptrend before the pattern. The pattern confirmed a reversal in the trend.
Dark Cloud Cover
This pattern is a two-candle pattern, and it is a bearish reversal pattern. It is also called a gap pattern because there is a gap between the two candles. The first candle must be green, and the second candle must be red.
Also, for this pattern to be applicable the market must be in an uptrend. The closing price of the second candle should be in the first half of the first candle.
Rising Sun
This pattern is like the dark cloud clover and this is also a gap pattern. It is also a bullish reversal pattern. The first candle must be green, and the second candle must be red. For the pattern to be applicable the market must be in a downtrend.
The closing price of the second candle should be in the second half of the first candle. The chart below shows a rising sun pattern after a downtrend. It is a powerful reversal pattern.
Tweezers Top & Tweezers Bottom
Tweezers top as shown in the image to the left forms when two consecutive upper shadows match. For the tweezer’s bottom, the two consecutive lower shadows must match.
Tweezer’s top is a bearish reversal pattern, and the tweezer’s bottom is a bullish reversal pattern. The tweezer’s top and tweezer’s bottom is a powerful pattern if they form another pattern as well. For example, the tweezer’s bottom can also form a bullish engulfing pattern.
Marubozu
The green candlestick above is a bullish Marubozu and the red candlestick pattern above is a bearish Marubozu. The Marubozu candle can be used as a continuation pattern or a reversal pattern. If Marubozu appears with the trend, then it is a continuation signal. If it appears against the trend, then it is a reversal signal.