Special Candlestick Patterns - Reversal and Continuation Signals

Special Candlestick Patterns

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Special Candlestick Patterns

Sixty Third session of Forex Training

Welcome back to Forex professional training in financial markets.

In this session Special Candlestick Patterns will be thoroughly studied.

Special CandleSticks

Trader can utilise special candlesticks when they form in the following situations:

  1. Near levels in H4 timeframes
  2. Near Fibonacci Levels in H4, Daily and Weekly timeframes
  3. Near economy key news or starting time of the New York session
  4. Near support and resistance lines
  5. Near middle line of Andrew’s Pitchfork
  6. On sharp descent or ascent

 Special Candlestick Patterns - Economic News - Andrew's Pitchfork Median, Pivot and Trigger Lines

First method

Hammer, Piercing Line, Dark Cloud, Hanging Man and Shooting Star are special candlestick patterns that can form in a trend to determine the future direction.

On the left graph, a Bullish Hanging Man has formed on an upward trend just after a Bearish Hanging Man.

This pattern confirmed that the uptrend would continue its direction towards the top.

On the right graph, a Bullish Triangle pattern has formed on an uptrend, in which a Bearish Hanging Man has formed on breakout point.

This candle pattern confirmed a powerful and suitable Buy signal that has been generated on the breakout point of given Triangle pattern.

So a trader could place a Buy order on this spot.

These candle patterns generate continuation signals and confirm the recent direction of a trend.

On the left graph, an Inverted Hammer has formed on a downward trend.

Another Inverted Hammer on this downtrend has formed, thus, trader could place a Sell order on these spots.

Special Candlestick Patterns - Piercing Line Higher and Lower Shadow - Inverted Hammer on Trend

On the right graph, an Inverted Hammer has formed on a downward trend followed by a continuous decline.

So Inverted Hammer generates continuation signals on a downward trend.

There are numerous examples on MT4 for further study.

For instance, an Inverted Hammer has formed on this downward trend followed by a sharp decline.

Another Inverted Hammer on another downtrend generated a Sell signal.

Thus, whenever Inverted Hammer forms on a downward trend, it is more probable that trend continues its descendant direction.

In another example, a Hanging Man has formed after a powerful Bullish candle, so trader could place a Buy order above the High price of the Hanging Man candlestick.

After Shooting Star, Hanging Man and Hammer candlestick patterns, it is presumptive that market price would continue its recent trend if there is another confirmation generated by other patterns or strategy.

In this example, a Flag pattern has formed and on the last peak a Tweezer pattern formed, so trader could place a Buy order over that candle pattern.

Two Hanging Man patterns have formed on the breakout point, thus, another Buy order could be placed by trader.

Later, another Hanging Man or Hammer has confirmed an upward trend.

If trader detects continuation signals from some patterns or strategies, then the mentioned candle pattern can be beneficial for a successful trade.

 Special Candlestick Patterns - Bullish and Bearish Trend Line - Shooting Star with Hanging Man

Second method

Trader can detect Buy or Sell spots via Levels. For example on left the graph, a level can be drawn which had significant effects on market trend.

A Fibonacci pattern can be inserted that price market reversed its direction on its level 61.8%.

A Bullish Hammer has formed on this spot, so 3 Buy signals can be derived from these patterns.

On the right graph, market price has returned to its downward direction after it has touched level 76.4%.

A Dark Cloud has formed on this breakout point, thus, trader could place a Sell order after market price has passed Low Price of given candle towards the bottom.

Reversal Bullish candles such as Hammer, Engulfing and Piercing Line form on downward trends, also traders can exploit Fibonacci pattern to detect these special candlesticks.

Special Candlestick Patterns - Dark Cloud over Fibonacci Levels - Support and Resistance Levels

Reversal Bearish candles such as Shooting Star, Engulfing and Dark Cloud form on upward trends, also traders can use Fibonacci pattern to detect these special candlesticks.

For instance, trader can draw a Level on this Uptrend as well as Moving Average pattern.

After price has passed the Level towards the top, a Bullish Hammer pattern has formed on a spot where Moving Average crossed the given Level.

Thus, trader could place a Buy order over given Hammer candle pattern after Buy signals were generated.

Levels have considerable influence on market trends.

For example, on H4 GBPUSD chart, price has declined towards the bottom after it has touched level 61.8% of Fibonacci pattern.

A Bearish Hammer has formed where price touched level 61.8%, thus, trader could place a Sell order.

TP prices could be determined on levels M, H/2 and H.

Market price has reached first TP price and it is presumptive that price would decrease to H/2 at least. In another example, trader can draw a Level which had remarkable effects on market price.

After price reversed its direction towards this level, a powerful and reliable Bullish Hammer has formed, thus, trader could place a Buy order with entry piece over this candle.

TP price can be 68 pips higher than entry price. A flag pattern formed in this region too, thus, trader could consider TP price by this pattern.

 Special Candlestick Patterns - Buy and Sell Trading Signals - Uptrend and DownTrend

Third method

When a Shooting Star, Engulfing, Dark Cloud and other special candles form on the last peak or valley of Double or Triple Top/Bottom patterns, then trader can place an order based on more reliable signals.

On the left graph, a Double Top has formed on an uptrend.

A Dark Cloud has formed on the second peak, so trade could place a Sell order lower than the given candle.

On the right graph, a Triple Top has formed in which a powerful Bearish candle on its peak generated a reliable Sell signal.

On the left graph, a Bullish Hammer has formed on the last valley of Triple Bottom pattern.

A Buy order could be placed over the given candle, sooner than the breakout point.

On the right graph, a Piercing Line candle on the last valley of the Triple Bottom has generated a Buy signal.

Triple and Double Top/Bottom are common patterns which can be combined with other patterns and strategies.

On GBPUSD chart, trader can detect a Double Top pattern in which a Bearish Hammer/ Dark Cloud pattern has formed on the last peak, thus, trader can place a Sell order under the given candle.

TP price can be considered 176 pips lower than entry price, on 1.6655.

There are numerous Double or Triple Top/Bottom patterns, trader can detect on charts.

 Special Candlestick Patterns - Pips and Pippet over or Lower than High or Low Prices

Fourth method

Trader can utilise Tweezer candles to determine pivot points.

On the left graph, two Bullish Hammer candles has formed a Tweezer pattern on a downward trend, so trader could place a Buy order after market price has passed High price of Tweezer.

On the right graph, another Tweezer has formed, in which a Bullish candle formed just after a Bearish candle.

Tweezer pattern with two Bullish candles has more power than Tweezer with a Bullish and a Bearish candle.

Left graph shows that a Bearish Tweezer pattern formed inside an upward trend. This Tweezer pattern includes two Shooting Star candles.

If a Bearish pattern includes two Bearish candles, it would have more power.

There are several examples on MT4 platform.

For instance, at the end of a downward trend, Bullish Tweezer with two Bullish Hammers has formed, thus, trader could place a Buy order over the High price of last Bullish Hammer.

There is a powerful Level just below Tweezer pattern that price could not cross it several times.

 "Special

Another candle pattern, a Bullish Hammer/Hanging Man pattern generated a Buy signal.

On the last trend of market price, an Inverted Hammer formed after a Hammer candle.

Thus, this Inverted Hammer confirmed that a Sell order could be placed after price declined lower than the Low price of given candle.

1st TP price could be 126 pips lower than entry price.

2nd TP price can be considered with the distance between High Price of Hammer candle and entry price.

It is assumed that price will decrease 126 and 200 pips lower, price will be 1.6588.

After a downward direction, market trend started an upward direction.

A Hanging Man candle has formed in this uptrend that confirmed trend direction.

Again, after price increased after a decline, a Hanging Man candle has formed with a confirmation on an upward direction.

These candles generate powerful and reliable signals that trader can determine while placing an order.

For example, after a downward trend started its movement, an Inverted Hammer has confirmed continuous downward direction.

TP prices could be 320 and 480 pips lower than entry price.

Just after a transient small uptrend, a Shooting Star candle has generated a Sell signal with TP price 395 pips lower than entry price.

Candles are powerful confirmations that trader can exploit for successful trades.

Special Candlestick Patterns - Hanging Man and Bollinger Bands - Upper and Lower Bands

Another example, a Bearish Hammer followed by a Bullish Hammer confirmed an upward direction.

A Hammer on an upward trend generated a Buy signal.

The mentioned special candles can assist trader to derive profit from trades. In this Triangle pattern, candles confirmed the upward direction.

On a Monthly chart of AUDUSD symbol, trader can detect a Bullish Hammer followed by a Bearish Hammer created a Tweezer Top pattern has generated a Sell signal.

So if a price decreases under the Low price, then trader can place a Sell order with TP prices 210 and 270 pips lower than the entry price, around 0.8891.

Connected Hammer candles can affect trend direction considerably.

 Special Candlestick Patterns - Price Action Trading Strategy and Methods - Triangle Pattern

In Price Action Strategy, on Gold charts, trend was supposed to react on this 1260.

Combination of some Hammer candles generated signal of a sharp and gradient movement.

Here a sharp candle with value $30 has formed after connected Hammer candles.

Trader can detect another example, like here, that has connected Hammer candles followed by a long and sharp trend.

Trader must practice multiple times to develop the ability to detect special candles, which have a considerable effect on trend movement.

That concludes this session, until next time and another session take care.

Linkages & Notices

You can also view the video of this session available on the PFOREX Financial Video tutorials.

You can also find the video of this session on PFOREX YouTube Channel.

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The PDF file of this session is also available.


PFOREX Educational materials in text and video formats are developed by PFOREX Department of Education to enhance and improve investors’ knowledge and trading skills. Due to high risks and volatile fluctuations in financial markets, traders and investors must develop their trading skills and knowledge. It is strongly recommended to apply Risk and Capital Management when trading in financial market.

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