By Melissa Tobing

There are many ‘funny’ names in candlestick charts. When I first learned about these charts, I just asked to myself “How could have somebody really thought about these words and where did he got those ideas?”

Those questions really made me eager to learn more and more. Imagine these words: “hanging man”, “hammer” (this is my favorite), “doji”, “dark cloud”, “shooting star”. Are those mean something to your mind? I bet no is the answer, if you are not a trader or not interested in trading.

Let me share my trading experience in using candlestick charts. I hope it would be very helpful to you. I know that many ‘housewives’ like me are trying to earn some extra money in currency or stock trading. We have something in common, such as (1) just have a “small dollar amount” to put in trading investment; (2) interested in trading but do not know how to start; (3) feel that trading tools are very difficult to understand

Now, let us get back to those words in candlestick charts. I am sure you are be able to like them.

We are now starting with some basic candles which could indicate “REVERSAL PATTERNS”. According to Steve Nison (author of Japanese Candlestick Charting Techniques, 1991) wrote that “a trend reversal signal implies that the prior trend is likely to change, but not necessarily reverse and recognizing the emergence of reversal patterns can be a valuable skill”.

I agree with him. Based on my trading experiences, candlestick charts would be a very important signal when the market is at the end of bearish or bullish trend. What are some basic candles which could indicate that the price will be reverse?

HAMMER
A hammer is a candlestick with long lower shadow and small real body at the upper trading range. Notify that the shadow is at least twice the length of the body and no matter what the color of the body, when it appears at the end of a bearish market trend, it might indicate that the price would be higher next, depends on what time period you use for trading (e.g hourly, daily).

HANGING MAN
A hanging man is as same as hammer, but it appears at the end of a bullish market trend. It might indicate that the price would be lower next.

ENGULFING
This is a combination of two candlesticks which have an opposite colors. Those two candles are also appear at the end of bearish of bullish market trend. It is important that the second candle body must engulf the first candle body, but not the shadows.

If the first candle is black, the second is not and they are at the end of a downtrend, it might indicate that the price would be higher next. Vice versa.

DARK CLOUD
It is a combination of two candlesticks that appear in a top of an uptrend. The first is a long white candle. The second price opens above the first day’s high and closes below the middle price of the first. It might indicate that the uptrend is nearly at the end.

PIERCING
It is also a combination of two candlesticks, but they appear in a bottom of a downtrend. The first is a long black candle. The second price opens below the first day’s low and closes above the middle price of the first. It might indicate that the downtrend is nearly at the end.

There are many more candles which might indicate reversal patterns and I’ll share with you in my other articles.

Melissa Tobing is a mom of two. She has achieved stock trading success for these recent years. She use candlestick charts and other technical analysis to help her trading decisions. Now, she is also in forex trading and found that candlestick charts are easy to understand and make her trading more profitable. Find out more about using candlestick charts at Forex Candlestick Easy