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Monday, January 24, 2011

Currency Trading Systems Must Use Technical Analysis Patterns

Posted by patrick

By Eloy Bartman

In case you are setting up a new trade, wait for a trend to emerge and go with it. Then, keep an eye on your trading display screen and wait for your reversal prior to closing out your position. There are actually 40 typical reversal patterns in Japanese candlestick trading. The 4 preferred patterns for one's fx trading are these.

Engulfing lines: They are a two-candlestick pattern that suggests a strong change in emotion. In a downtrend, bearish engulfing line pattern includes a small unfilled (green) line as well as a significantly bigger filled (red) line. If the weak candle fully exceeds and closes below the bullish line, it could be an indication the uptrend has run its course. When the bearish candlesticks engulf several of the preceding bullish candlesticks, the result is enhanced. The contrary will additionally apply to bullish engulfing lines.

Tops n bottoms tweezer: The perfectly-named tweezer top and tweezer bottom are minimal reversal patterns. A tweezer top transpires when several shadows (or wicks) form a price top at pretty much same point. It signals that the bulls are experiencing difficulties smashing through this level. Note that the tops don't need to be in consecutive periods. A tweezer bottom stands out as the opposite of a tweezer top.

Evening star - morning star: These amazing three-candle patterns function exceedingly well. A morning star reverses a weak trend, the 1st candlestick includes a long, bearish real body when the downtrend increases. Your second candle proceeds the slide early in the period however later recovers part of its losses. The next candle includes a powerful rally and closes above the midpoint of the initial candlestick. An evening star will be the reverse and functions tolimit an uptrend.

Hammer hanging man: A hammer is known as a strong pattern if it comes just after a evident downtrend. It provides a small real body having a long lower shadow. The body can be filled or empty (red or green). This pattern signifies a sharp rejection of a new low and suggests a potential change in trend. This one pattern is just somewhat reliable. Wait for affirmation of a reversal inside the following candle prior to making a decision. The opposite of a hammer is known as hanging man.

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