Candlesticks are a great visual help for traders to see the performance of an asset’s price for a particular period. They often form specific pictures that give traders hints about potential price movements and what is the best option to make profits and prevent losses. We are going to talk about the four best candlestick patterns for 2020.
More on the topic: Candlestick analysis guide for beginners.
Bullish Engulfing Candlestick
The Bullish Engulfing pattern often shows traders’ trend changes. Noticing it is not a problem at all. The formation of this candlestick pattern is usually found when the value of an asset suddenly passes both high and low of the last day’s range. Here is how it looks like.
Such a pattern often informs about the fall in value where support or buying volume are found and a rapid growth exceeding the high of the last day’s range.
Bearish Engulfing Candlestick
The Bearish Engulfing pattern is the complete opposite of the Bullish Engulfing pattern. It represents trend changes or long-term price drops. Here is how it looks like.
First, it moves a level higher than the last day high. There it finds selling volume and rapidly goes down, exceeding the last day’s low. The Bearish Engulfing pattern can be found at the top of a trend or even during any time and warns traders about the possible price drop.
More on the topic: 3 types of Forex charts and how to read them.
Hammer Reversal Candlestick
When market participants suddenly start rejecting support and resistance, the hammer reversal pattern is formed. Here is how it looks like.
In the picture above it is possible to see that the price first moved downwards and found support/buying volume. The candle was surrounded at its opening level by bullish candles. The next day’s session gives a picture of a strong bullish up candle being built. A new trend had appeared after investors gained an interest in the asset.
The hammer reversal can be encountered in both types of trends. The name is taken from the picture of a hammer they form.
When there is a situation on the market where indecision prevails, a Doji pattern is formed. It is usually met when bullish and bearish candlesticks are attempting to take the top in the movement. Here is how it looks like.
A Doji candlestick has a small body with close and open prices near each other. The wicks can have a longer length than in other candlesticks. There usually is a sudden move either upwards or downwards after this pattern appears. The Doji pattern is not considered to be a good entry position, but it shows that changes are going to be noticeable soon enough.
We have reviewed the top 4 best candlestick patterns for 2020. They are going to be the trending patterns this year, and that is why you must know their meanings.