The most reliable candlestick pattern to trade CFDs
Candlestick pattern trading is also known as the price action trading strategy. New traders might not have any idea what we are talking about. But there is nothing to worry about. Let’s make things easier for novice traders. As a trader, you can analyze the chart in many formats. For instance, the price movement can be seen in the form of bars, line, candlestick, area chart, etc. Depending on a trader’s skill and the market requirement, we chose the chart style. But it is safe to assume the majority of British traders prefer the candlestick chart as it tells you a lot.
Taking trades at the raw price movement is a very tough task. You might not be able to trade the market with confidence. But this article is going to change your life. We will discuss some of the most reliable candlestick patterns you can use in the trading industry.
Bullish engulfing pattern
The bullish engulfing pattern is a bullish reversal pattern. Usually, the bullish engulfing pattern is found at the end of the downtrend or when there is a bearish correction in the price. It consists of two candles. The first candle is a bearish candle which is part of the downtrend. The second candle is a strong bullish candle that completely engulfs the first candle. When you find such a pattern, you can execute long trade with a stop below the bullish engulfing pattern.
Bullish morning star
The bullish morning star is a very popular pattern and is widely used by the experts in the CFD market. The first candle is part of the bearish candle. The second candle is a bullish pin bar or doji. The third candle acts as the confirmation candle and its strong bullish candle. If you spot the bullish morning star pattern at the critical support level, you can execute long trade without having any doubt. But don’t expect this pattern will always generate profitable trades. At times, the bullish morning star pattern fails due to a shift in the market sentiment or a major economic announcement.
Bearish engulfing pattern
The bearish engulfing pattern is similar to the bullish engulfing pattern but it performs the opposite functions. The first candle is bullish and it will hit a resistance level. The second candle is going to be a massive bearish candle. It will completely engulf the first candle forming the bearish engulfing pattern. You can short the asset with confidence as the bearish engulfing pattern is a powerful bearish reversal signal. If possible, reinforce the idea with the help of news.
Bearish evening star
The bearish evening star is also used by the pro traders. The first candle is the part of the then bullish trend. The second candle will be a doji or bearish pin bar. The third candle will be a massive bearish candle that will confirm the establishment of the downtrend. If you want to make consistent profit with this method, learn to find the bearish evening star at the critical resistance level.
These patterns are very reliable and generate a decent profit. But the position of the candlestick pattern is very important. If the pattern is formed at the minor support or resistance level, you should ignore the trade setup. You must find this pattern at the major levels only. In case, you have spotted one good signal don’t increase the risk to earn more. The maximum risk for the candlestick pattern trading method is 2% of the account balance. By limiting the risk exposure in the trade, you will get the unique ability to minimize the losses. Never try to push yourself to the extreme limit while trading the CFD market. Learn about the safety precautions taken by elite traders at Saxo. Last but not least, remember that losing trades are going to a part of this business.