Candlestick charts are a unique and useful method of charting in the forex market where candle-like shapes are used to draw up charts. The final charts are a little bit similar to bar charts, but they are much smoother than those. As with any other chart, there are chock full of patterns!
As these patterns are made from the building block of the charts, i.e. candlesticks, that is how they are names. We refer to them as candlestick patterns. And some of these patterns are made from only one single candlestick. We refer to them as single candlestick patterns.
As simple as they might look, precisely because of their simple nature and structure they have a lot of similarities with each other and can be easily confused with their own counterparts in this category.
In this article, we are going to introduce to you all the single candlestick patterns so you can become a savvier forex trader.
There are a number of candlestick patterns that fall under the category of Doji Candle. This candlestick pattern is perhaps the most distinguished one, since it basically has no body. This means in the formation of this pattern’s candle, the opening price and the closing price are either way too close to each other or they are exactly the same.
So this type of candlestick pattern only has wicks sticking out of it. The reason this candlestick pattern does not have a significant body is because there is no overarching trend in the market, and therefore prices are not being pulled to the bullish or bearish sides.
You need to keep in mind that if this candlestick is registered following an uptrend, it might signal a reversal. Naturally, when there is uptrend, indecisiveness does not really bode well for the market. On the other hand, if it is formed on a downtrend, it might just be the fuel to the flame of bears and push the market lower.
This single candlestick pattern has a small body and no upper shadow. But it has a really long lower shadow, which is because after the candle begins with the opening price, the prices fall much lower. But they do not stay down, they recover to a great extent and get close to the opening price – hence the small body.
This pattern usually forms when a downtrend is near its end. Therefore, it signals a reversal toward the bullish market.
An invented hammer also has a small body, indicating closeness between opening and closing prices. But instead of a low lower wick, it has a long upper wick. It is also usually seen at the end of a downtrend. When seen on that specific part of the chart, then it indicates that the downtrend is about to end and an uptrend is about to begin.
This single candlestick pattern is the exact shape of the inverted hammer explained above. This means it has a small body with a long shadow at top. But if they are the same shape, what is their difference? The difference is that a shooting star is normally seen on the higher part of the chart after an uptrend. When seen under such conditions, a shooting star pattern indicates that the bullish trend is near its end and a reversal is about to happen.
A spinning top candle is very much so similar to a Doji candlestick pattern. Not so much in shape, but more in nature. Much like a Doji pattern, a spinning top is also when there is not a prevailing trend in the market or there might not be. In any case, it is a sign of uncertainty.
The spinning top candlestick pattern has a small body with medium sized shadows at both top and bottom. There is not a specific place on the chart where a spinning top would normally appear. It can be detected both following an uptrend or a downtrend. In either of the cases, when this pattern is seen it means the market is not sure where to head next.
So when you see this pattern, you can be certain that the previous trend will keep going. Before making a decision and adjusting your position, you need to use other methods and extra steps of analysis to confirm your hunch.
White Marubozu and Black Marubozu
Marubozu is a Japanese term. And yes if you have not so far, then you will definitely encounter many Japanese terms in your trading journey especially while studying candlesticks. The reason is that the candlestick approach to charting has a Japanese origin. In any case, Marubozu means a head that has been shaved. As such, the shape of the candlestick in this pattern is a candle with only a body and no wicks or shadow on either top or bottom.
There are two forms of the Marubozu candlestick pattern. One is usually called a bullish Marubozu and the other is known as a bearish Marubozu. They are also referred to as white and black respectively.
So the shape of a Marubozu, either bullish or bearish, is just a long body candle with now shadow. Naturally, a bullish Marubozu is a green candle, which means the closing price is higher than the opening price. And a bearish Marubozu is a red candle, which indicates that the opening price is higher than the closing one.
With a bullish Marubozu, if it occurs after an uptrend, it could mean that the uptrend is likely to continue. And if it is seen after a downtrend, then naturally it could signal a reversal.
And with a bearish Marubozu, if it is detected after an uptrend, then it can be the sign of a bearish reversal. On the other hand, if it is located after a downtrend, then it signals that the downtrend might likely continue.
A hanging man candle is the exact similar shape as the hammer candlestick pattern. Therefore, it means that a hanging man has a small body, no upper shadow, and a long lower shadow. And just like other candlestick patterns that have the same shape, their difference is in their nature and also where they are usually spotted.
While a hammer is a bullish reversal signal, a hanging man is a bearish reversal signal. As a result, a hanging man is usually seen when there is an uptrend already in the market.
There are many candlestick patterns that are made from only one single candlestick. Though extremely simple and straightforward, this group of candlestick patterns can provide forex traders with extremely valuable information.