Japanese Candlesticks with Support and Resistance

In this lesson, we will look at the different candlestick patterns that we explored in the previous sections and show you how to trade them using the support and resistance levels. 

But before we get started, it is important to remember that as with any technical analysis indicator or tool, if a candlesticks pattern points to a reversal or continuation that does NOT mean it will 100% happen.

This is the Forex market we are talking about. There are other factors to take into consideration like market news and economic data. Nothing is set in stone!

IMPORTANT: Candlestick basic chart patterns are not the holy grail and are not to be used on their own. You must ALWAYS consider the market environment and what the price is telling you.

Using Candlestick Patterns with Support and Resistance

As you already know, support and resistance levels drawn on Japanese candlestick charts are a valuable tool used by Forex traders that help identify possible points on Forex charts where the price of a currency pair may change directions.

Let’s look at an example from a real Forex candlestick chart.

Forex candlestick chart

In our example, you can see that the candlestick chart shows there is resistance around the 1.4900 level.

What would YOU do in this situation?

I’ll assume that you’d really want to place a trade but decide to wait instead because the candle that touched this level looks quite bullish. In other words, the market sentiment seems to be bullish.

Right?

Two candles later you spot a familiar three inside down candlestick pattern, which if being the smart trader you know is a bearish signal for a selling pressure!

Using these bearish reversal patterns as your sell signal confirmation, you go ahead and sell the pair.

bearish reversal patterns candlestick

Because of your patience and your knowledge of candlestick patterns, you have greatly increased the odds in your favour.

Let’s see what happened after you sold…

candlestick patterns profit

Ta da! 

The pair almost immediately goes in your favour and bags you hundreds of pips.

Time to go to the nearest car dealership and buy yourself the newest sports car.

And a boat. With matching colours.

You may be thinking, “Why do I have to pair support and resistance levels with candlesticks?  I could get a ton more money with just candlesticks and make more money”.

NO!! 

Take another look at the same chart of your hypothetical trade…

I’ve taken my precious time to highlight some potential trade signals based solely on candlestick formations. 

Go ahead, have a look.

trade signals candlestick pattern

If you had traded on those candlesticks patterns alone, you would have lost.

EVERY.

SINGLE.

TIME.

By simply pairing candlestick formations WITH support and resistance levels as part of your trading plan, you have increased your odds of winning. The bottom line, using support and resistance levels is a great technical indicator to predict the price movement of any financial instrument in the forex market.

You’re welcome.


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