Candlestick charts are easier to interpret and therefore used by most of the traders and investors. Pictures of price action are very easy to understand because these are more visually appealing. Traders can very easily observe and compare the relationship existing between the opening and closing prices with high and low prices. A candlestick pattern has 3 parts, the upper shadow, the real body and the lower shadow. If the real body is hollow then it means that the closing price is more than opening price and so it indicates the buying pressure. On the other hand, if the real body of the candlestick is solid then it means that the opening price is more than the closing price and so this situation indicates the selling pressure.
Candlestick patterns are of many types depending on the market situation. Some of the most important patterns are Bearish, Bullish, Spinning Top, Doji and Hammer etc. These patterns can further be categorized, for example, Doji Candlesticks are also of two types such as Dragonfly Doji Candlestick and Gravstone Doji Candlestick. Traders and investors should study all types candlesticks because each one is for a different situation and a trader or investors should be ready to trade in any situation. The study of different types of candlestick qualifies the traders and investors to trade in different situations with higher probability of profit. Trading like an inexperienced trader will only empty your bank account so to trade successfully; you need to have experience of different situations. To gain experience of different situations, you should place your trade like a qualified trader and according to your knowledge gained from learning.
After a trend continues for short or long period, market may move in opposite direction for short or long period. This movement of market in the opposite direction for long or short period after a trend has continue for short or long period is called reversal and the traders say that trend has reversed. A person new to Forex Trading may think about Reversals that an old trend ends and a new trend begins but it is not 100% true and rarely happens because trend reversals occur slowly and in stages. A trend reversal simply means that the previous trend is about to change but it may or may not be a reverse. Reversal patterns are of many types such as bearish and bullish engulfing pattern, Hammer, Inverted Hammer, Hanging Man, Morning Star, Evening Star, Shooting Star, Doji Star, Tweezers Top and Tweezers Bottom.