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Basic Candlestick Patterns in Forex [EXPLAINED]

Japanese Candlestick Chart Patterns Basic Candlestick Patterns in Forex [EXPLAINED]

Top.
Marubozus.
Dojis.

No, this lesson is not in a different language.

All of the above are basic Candlestick patterns.

Let’s take a look at each type of candlestick and what they mean in terms of price action.

Spinning Tops

What is a spinning top?

A spinning top is a candlestick pattern with a short real body that’s vertically centered between long upper and lower shadows.

This candlestick pattern indicates uncertainty in the market and therefore indecision between the buyers and sellers.

Why are they called spinning tops?

It’s actually quite funny. Remember these?

The Forex spinning tops are named after them simply because they share the same body structure.

What does a spinning top look like in Forex?

The small real body (hollow or filled, green or red) shows little movement from open to close, and the shadows indicate that both buyers and sellers were fighting but nobody could gain the upper hand so the result was a standoff.

If a spinning top forms during an uptrend, this usually means there aren’t many buyers left and a possible reversal in direction could occur.
If a spinning top forms during a downtrend, this usually means there aren’t many sellers left and a possible reversal in direction could occur.

Now let’s see what a spinning top looks like on an actual Forex chart.

Marubozu

Sounds like an African clan or that we are about to teach you some Voodoo spells, but worry not.

This is still a Forex Trading Academy.

In Japanese, the word “marubozu ” translates to “bald head” or “shaved head” .

So what do you think it means for our candlestick?

NO.

JUST NO.

In Forex, Marubozu is simply a long candlestick with no upper or lower shadow (or wick) and can appear anywhere on the chart.

It basically looks like a vertical rectangle.

In case you missed school when you were learning about vertical rectangles, here’s what they look like.

Marubozu comes in both a bearish (red or black) and a bullish (green or white) form and is super easy to spot due to its long body.

The longer the candle, the stronger the price move (whether it jumped up or down).

Let’s see what Marubozu looks like on a Forex chart.

Pretty easy to spot, right?

Depending on where a marubozu is located and what color it is, here are few guidelines:

Green or White Marubozu

If a Green Marubozu forms at the end of an uptrend, a continuation is likely.
If a Green Marubozu forms at the end of a downtrend, a reversal is likely.

Red or Black Marubozu

If a Red Marubozu forms at the end of a downtrend, a continuation is likely.
If a Red Marubozu forms at the end of an uptrend, a reversal is likely.

Doji

Doji candlesticks are unique candles that reveals indecision between buyers and sellers in the Forex market.

In a doji pattern, the open and close prices are equal (or almost exactly equal) and their bodies appear as a very thin line.

Again, no.

Even though the image above might resemble an indecisive thin candlestick, it is not what Dojis look like in Forex. Want to see what they really look like? Here you go.

And what does it look like on a Forex chart? Just like this!

There are four main types of doji to watch out for:

Long-legged doji have a lengthy wick both above and below the body
Gravestone doji have a high wick above the body and nothing underneath
Dragonfly doji have a long wick beneath the body and little to no wick above it
Four-price doji have no wick at all

While the traditional Doji star represents indecisiveness, the other variations can tell a different story, and therefore will impact the strategy and decisions traders make. Let’s explore each type in more detail below.

–

Long-Legged Doji

A long-legged doji, or a ‘rickshaw man’, is similar to a neutral doji, except for the fact that the wicks are longer on either side.

➡️ Characteristics:

Extended upper wick
Extended lower wick
Greater volatility

➡️ Indicates:
Indecesion

➡️ Chart Formation:

➡️ Chart Formation on Forex Chart

Gravestone Doji

A gravestone doji candle is a unique formation as it only has an upper shadow. It is viewed as a bearish reversal candlestick pattern that mainly occurs at the top of uptrends.

The open, high, and close are near the same price in the lower half of the candle.

➡️ Characteristics:

Appears at the top of an uptrend
Shows the rejection of higher prices
Bearish signal

➡️ Indicates:
Change in direction

➡️ Chart Formation:

➡️ Chart Formation on Forex Chart

Dragonfly Doji

A dragonfly Doji candlestick formation is the opposite of gravestone doji as the open, high, and close are near the same price in the upper half of the candle.

It can occur in both an uptrend and a downtrend, but it is considered to be stronger when it takes place at the bottom of the downtrend.

➡️ Characteristics:

Appears at the bottom of a downtrend
Shows the rejection of lower prices
Bullish signal

➡️ Indicates:
Change in direction

➡️ Chart Formation:

➡️ Chart Formation on Forex Chart

The Four Price Doji

Four price doji is a rare type of candlestick where open, high, low, and close are all the same. This candle reflects the highest extent of indecision between bulls and bears and often appears in pre-market and after-hours trading.

➡️ Characteristics: