If the close is higher than the open, the candle will be green or white; if the close is lower than open the bar will be red or black but other colors can often be found on different charts. The open or close are not necessarily the high or low price points of the period though. If there are no upper or lower shadow it means the open and close were also the high and low for that period which in itself is a kind of signal of market strength and direction. These are called dojis and have special meaning, a market in balance, and often give strong signals.

Due to the highly visual construction of candlesticks there are many signals and patterns which traders use for analysis and to establish trades. What many traders fail to pay attention to is the tails or wicks of a candle. They mark the highs and lows in price which occurred over the price period, and show where the price closed in relation to the high and low. But on some days, as when the price is trading near support or resistance levels, or along a trend line, or during a news event, a strong shadow may form and create a trading signal of real importance.

If there is one thing that everyone should remember about the candle wicks, shadows and tails is that they are fantastic indications of support, resistance and potential turning points in the market.

To illustrate this point lets look at two very specific candle signals that incorporate long upper or lower shadows. The hammer is a candle that has a long lower tail and a small body near the top of the candle. It shows that during that period whether 1 minute, 5 minute or daily candlesticks that price opened and fell quite a distance, but rallied back to close near above or below the open.

But they are significant when a long lower tail—hammer—is seen near support. It indicates the sellers tried to push the price through support but failed, and now the buyers are likely to take price higher again. The thing to remember here is that a hammer could indicate a new area of support as well. Three candles, all with long tails occurred in the same price area and had very similar price lows.

That three long tailed candles all respected the same area showed there was strong support at It shows that during the period whether 1 minute, 5 minute or daily candlesticks that price opened then rallied quite a distance, but then fell to close near above or below the open. This is sign that sellers stepped into a hot market and created a graveyard for the buyers. Long upper tails are seen all over the place, and are not significant on their own. But they are significant when a long upper tail—gravestone—is seen near resistance, unless of course a new resistance level is being set.

It indicates the buyers tried to push the price through resistance but failed, and now the sellers are likely to take price lower again. The price tested this resistance area multiple times, finally it broke above it, but within the same bar one hour the price collapsed back. The price did proceed lower from there. Look for them on candles, they are important.

Multiple long tails in one area, like in figure 1, show there is a support or resistance there. A hammer opens and closes near the top of the candle, and has a long lower tail. A gravestone opens and closes near the bottom of the candle, and has a long upper tail. The next thing to look out for is the doji, a candle that combines traits of the hammer and gravestone into one powerful signal.

Dojis are among the most powerful candlestick signals, if you are not using them you should be. Candlesticks are by far the best method of charting for binary options and of the many signals derived from candlestick charting dojis are among the most popular and easy to spot.

There are several types of dojis to be aware of but they all share a few common traits. First, they are candles with little to no visible body, that is, the open and closing price of that sessions trading are equal or very, very close together.

Dojis also tend to have pronounced shadows, either upper or lower or both. These traits combine to give deep insight into the market and can show times of balance as well as extremes.

In terms of signals they are pretty accurate at pinpointing market reversals, provided you read them correctly. Like all signals, doji candles can appear at any time for just about any reason. It takes other factors to give the doji true importance such as volume, size and position relative to technical price levels. Truly important dojis are rarer than most candle signals but also more reliable to trade on.

Here are some things to consider. First, how big is the doji. If it is relatively small, as in it has short upper and lower shadows, it may be nothing more than a spinning top style candle and representative of a drifting market and one without direction.

If however the doji shadows encompass a range larger than normal the strength of the signal increases, and increases relative to the size of the doji. Candles with extremely large shadows are called long legged dojis and are the strongest of all doji signals.

One of this type appearing at support may be a shooting star, pin bar or hanging man signal; one occurring at support may be a tombstone or a hammer signal.

Look at the example below. There are numerous candles that fit the basic definition of a doji but only one stands out as a valid signal. This doji is long legged, appears at support and closes above that support level. Another confirming indication that a doji is a strong signal and not a fake one is volume. The higher the volume the better as it is an indication of market commitment. In respect to the above example it means that price has corrected to an extreme, and at that extreme buyers stepped in.

It also means that near term sellers have disappeared, or all those who wanted to sell are now out of the market, leaving the road clear for bullish price action. A doji confirming support during a clear uptrend is a trend following signal while one occurring at a peak during the same trend may indicate a correction.

The same is true for down trends. Failing to account for trend, or range bound conditions, can be the difference between a profitable entry or not. The below demo video, explains how to configure a robot using the builder feature at IQ Option. The video explain how to specifically setup a strategy based on candlesticks, and doji patterns within them;.

In the example above a call option is clearly the correct thing to do but if purchased at the close of the doji, it could easily have resulted in a loss. The doji shows support like sonar shows the bottom of the ocean but that does not mean a reversal will happen immediately.

The best thing to do is to wait for at least the next candle and target an entry close to support. This same is true for resistance as well. Expiry will be your final concern. This is a very apt saying that simply means getting caught up in the small things and not seeing the bigger picture. This can happen all to often when trading and is especially common among newer traders.

Candlesticks, and candlestick charting, are one of the top methods of analyzing financial charts but like all indicators can provide just as many bad or false signals as it does good ones. For that reason alone it is a good idea to filter any candle signal with some other indicator or analysis.

Focus on different types of pin bars, and learn about doji candles. Become well acquainted with the workings of the hug and harami patterns. These formations are great for day trading. In addition, remember that all candlestick patterns work best in context. Remember that they must always be preceded by a trend and that it is useful to use additional technical analysis tools to get a broader view of the market. Combining different techniques may seem difficult at first in trading candlestick patterns for beginners.

This is the next step once you have identified exactly which candlesticks you are dealing with in a trade. Always remember that when trading on IQ Option, you should only act when the signal is strong enough. For a candlestick to give off a strong signal, it needs to have two characteristics. It should be larger than all previous candlesticks on the chart or have a long shadow.

It could be one of these characteristics or even at times both. As mentioned earlier, candlesticks might form at just about any point on a trading chart. Candlesticks create significant signals or at times insignificant ones. One sure characteristic of strong signals is that they are usually formed at support or resistant targets. These targets are simply points where traders like you join the market to buy or sell.

This is because it is at these points where prices are expected to change drastically at any time. But for you to join the market and make a profit, you need to know the expected direction of change. Whether it will continue in the direction of market trend or reverse. To know this, you need to analyse the candlesticks, trends and signals altogether. Doing this will also help you make the right trading decision. After you have determined the candlesticks formed, their signal, and the support or resistance targets, you will now have to wait for the candles to close.

This is one of the most important things to do before making a trade decision on IQ Option. After all, candlesticks will only give you signals once they close. The best candlestick strategy must be based on fully drawn candles. Until a candlestick close occurs, the shape of the candle can change. Keep this in mind. For example, the long-legged doji candlestick usually starts out as a long bull candle but thereafter closes when it is short.

Take note that a reverse usually happens when the following candle formed is smaller. Most professional traders insist that for you to increase your chances of making money from trading, you need to have a plan and strategy.

Add this one to your list. If you have your own best candlestick strategy then go ahead and tell us in the comment section below. For more information check out The Ultimate Guide For Trading Candles On IQ Option. General Risk Warning: The financial products offered by the company carry a high level of risk and can result in the loss of all your funds.

You should never invest money that you cannot afford to lose. Average rating 4. Vote count: No votes so far! Be the first to rate this post. Fulltime Day trading, and help Iq option wiki in my spare time to build an awesome platform to help beginners out there.

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Candlestick chart pattern is a technique used by traders to identify the price movement of an underlying asset, and forecast future price movement. Candlestick patterns can be traded both on the currencies and the stock market. They were first discovered in Japan by Munehisa Homma — , hence they are known as candlestick patterns or Japanese candlesticks.

Candlestick chart is composed of two main parts- The body and the shadows. The body is the rectangular box that shows the trading range between the opening and closing prices, i. The shadows are lines projecting from the upper and lower edge of the body.

Shadows are usually short, but some long candlesticks have no shadows at all. Traders employ a variety of signals and patterns to analyze the market and set trades due to the highly visual nature of candlesticks. The stronger the real body, the greater the pressure.

A long green body, for example, indicates more buying pressure than a little green one. A lengthy red body has more selling pressure than a tiny crimson one. The closing of a candle may be used to determine the group of traders that was strongest at the end of the bar. If you have a long lower shadow coupled with only a little upper shadow, it indicates that sellers attempted to drive the price down, but were ultimately outdone by buyers who were able to force the price back up and held their ground at the close.

The presence of a long upper shadow but very little lower shadow indicates that purchasers attempted to push the price higher, but ultimately the sellers were able to force the price back down and hold their ground at closing. Many traders overlook the tails, or wicks, of a candle.

They record the highs and lows in price over the period, as well as where the price closed about the highs and lows. However, on certain days, when the price is trading near support or resistance levels, or along a trend line, or during a news event, a powerful shadow may develop and provide a trading signal of genuine importance. The most important thing to remember about candle wicks, shadows, and tails is that they are excellent indicators of market support, resistance, and turnaround possibilities.

A cluster of several lengthy tails, such as in figure above, indicates a support or resistance zone. The head of a candle consists of a hammer, which opens and closes near the top of the candle. The lower tail is lengthy. A gravestone opens at the bottom and closes towards the top of the candle, with a long upper tail.

The next thing to look for is the Doji, a candle that combines characteristics of the hammer and tombstone into one strong signal. These are composed of many candlestick patterns which occur together and reveal potential reversals or continuations in the current market trend and are based on the fact that these patterns have appeared throughout history as reliable reversal signals.

It is important to note before we go any further that not all of these candlestick patterns indicate a change in direction for prices. In some cases, they can be used to confirm the current trend if they appear in the same direction as the trend. The best candlestick patterns for binary options are composed of certain lines which need to be combined to work properly.

The first line is created by drawing two or more trendlines that act as support or resistance for price action. The second line is created by connecting at least two or more candlestick patterns that indicate potential reversals. The first line, which is generally composed of two trendlines, must form a chart pattern to be effective because it will act as support or resistance for price action depending on whether it appears above or below the current market price.

The same applies to the second line which is generally composed of candlestick patterns forming potential reversal signals. However, this line should not be connected until these candlesticks appear first because it will act as support or resistance depending on whether they are above or below the current market price. Once these two lines combine, we know that price is likely to either reverse or continue in the same direction depending on whether these lines are broken. The key to reading a candlestick chart pattern is to know what the different parts represent.

Once this is understood, you will be able to efficiently use the patterns in your trading strategies. Identifying candlestick patterns is one of the simplest and most effective ways an investor can look for quick profits or losses. A Doji is a candle with virtually no shadow in it or only a very short shadow. It is formed when the price of a security at the end of the day when the session closes has not changed much from opening.

This means that no strong forces are pushing up or down during this time, so it is likely to continue moving in the same direction as when these forces were last seen. This looks like a hammer formation with the difference that the body has to be at least two times larger than the real body of the previous session. A hammer is a candlestick formation that represents the reversal of a bearish trend and signals support.

The body is formed by a wide bar with small shadows at the top and bottom. Then, there is one large shadow usually located at the bottom of the candlestick indicating that the price opened higher than it closed during this period but then closed at a price lower than where it opened.

This suggests that the market was not able to sustain its current level and soon went down, pushing the price below the opening price of the day. It also means that buyers came into the market and were able to push the price significantly higher than where it opened for this session, but sellers fought back and pushed the price slightly lower before the period closed.

The engulfing pattern looks like a more complicated version of a Doji because it has a much longer body on both sides of the session, with small shadows at the top and bottom of the candlestick.

A shooting star occurs when the price opens at a high level during a bullish trend and then closes significantly lower than the opening price. This suggests that sellers took control of the session and drove prices down to a level where they were able to push it up again slightly before closing.

The lower part of this candlestick represents resistance which was not surpassed during the period. There is no confirmation following a shooting star, but if it is part of a bearish reversal pattern then it can be worth taking note of. The Hanging Man formation looks like a hammer, but with one or more shadows located on the upper part of the candlestick.

This means that the price opened either at the same level as it closed during its previous session or even slightly higher, and then closed significantly lower than where it opened. There is no confirmation following a hanging man, but if it is part of a bullish reversal pattern then it can be worth taking note of.

This is a special kind of Doji that is formed when the market closes at or near the high of the period and has no shadow at all on top of it. This means that sellers controlled the price during this session, but buyers were able to push the price back up before the period closed. There is no confirmation following a Gravestone Doji, but if it is part of a bearish reversal pattern then it can be worth taking note of. This candlestick pattern looks like an engulfing pattern with the difference that the second candlestick has to open within the body of the previous period following its closing.

This suggests that buyers came into the market and were able to push the price up significantly higher than where it opened for this session.

This is a bullish formation where we see a long bearish session followed by a period during which the price opens lower than it closed during the previous session and then moves significantly higher, and closes near the high of the session. This means that buyers were able to fight off any selling pressure and push prices significantly higher by the end of this period.

This is a bearish formation where we see a long bullish session followed by a period during which the price opens higher than it closed during the previous session and then moves significantly lower, and closes near the low of the session. This means that sellers were able to push the price down by the end of this period. This pattern is a more advanced version of a bullish or a bearish engulfing candlestick pattern, and it suggests that the trend which was dominant during the period before this pattern formed will reverse.

This means that the downtrend is over and there might be a reversal to the upside, but during this reversal, sellers will try to return prices down by pushing them slightly lower before closing the session. These are flat lines drawn based on the highs and lows of consecutive candlesticks. If the price is above a trendline, it means that this trendline is going to be used as resistance during a potential reversal which will be revealed by a breakout from below or breakdown from above.

The opposite applies for a downtrend where if the price is below a trendline, it means that this trendline is going to be used as support during a potential reversal which will be revealed by a breakout above or breakdown below.

This is because these lines are drawn based on the highs and lows of consecutive candlesticks, so if price manages to break above one of them it means that there is more supply than demand and therefore there is more room for prices to decrease.

The opposite applies if prices break below one of these lines. The main problem with trendlines is that they are not very precise on their own, but when combined with other indicators or candlestick patterns, they can provide some valuable information.

This is because the length of the shadows indicates whether there is more supply or demand at this point, which means that if the shadow is long it means that the current price is coming from a place where demand exceeds supply. The opposite applies when the shadow is short. The second main problem with trendlines on their own is that they are not precise enough to use on their own.

These two candlestick patterns have the same function, which is to reveal potential reversals in the current market trend, and it does this by showing that there might be more room for prices to move in either an upward or a downward movement. The Doji represents indecision in the market where buyers and sellers are in equilibrium and price is not able to reach new highs or lows.

This means that this indecision can be used as an indicator that there might be room for prices to move upwards or downwards, depending on which direction the session closed in. The spinning top represents indecision similar to the doji, except it is more advanced because it shows that buyers and sellers are in equilibrium but the price can reach new highs or lows. These are just a variation of the breakout strategy which is used by traders to determine whether or not the price has broken an important barrier or not.

The basic premise behind this strategy is that you will only be trading following a breakout from a chart pattern, and this works because these patterns have been previously established as reliable reversal signals. For this strategy to be effective, your chart patterns must have a reliable reaction after breaking out from them. Make sure you know what you are doing before trading the breakouts because they can lead to false signals if not used properly. The best candlestick patterns for binary options trading include both reversal and continuation signs which means that you should be trading following these signals.

The tricky part about this is that you cannot trade both of these types simultaneously because they will cancel each other out and the result will be a false signal.

This strategy works best with continuation candlestick patterns and can let you trade in the direction of the current trend. However, it only works if the candlestick patterns which you are following appear within a bearish or bullish trend.

For this strategy to work properly, the chart pattern that is broken must have a reliable reaction post-breakout and it must not be too close to your current entry point. These are composed of at least two small candlesticks which appear consecutively with their shadows providing resistance to the current trend. If you are using this strategy for trading binary options, make sure that your chart patterns have a clear reversal sign to work properly.

Also, it is important to remember that these signals will only provide reliable entry points if they appear during bearish or bullish trends. It is usually not recommended to use this strategy with the current trend because it will only provide false signals and result in losses for you. Doji candlesticks: These are composed of small candles which have shadows that do not reach their body or wick. The Dojis must appear consecutively, which means that you should be using a 5-minute chart to ensure that this happens.

This strategy is simple, and it works by providing reliable entry points following the consecutive Dojis. The best time to use this strategy is during a strong trend because it will help you identify reliable entry points following the Dojis, which may result in continuous movements of the same direction. For this to work best, make sure that your chart patterns have been previously established as reliable reversal signals and that they appear during a bearish or bullish market.

Candlesticks are by far the most effective way to plot binary options on a chart , and dojis are among the most popular and simple to identify of the numerous candlestick signals derived from candlestick charting.

There are several different varieties of dojis to be aware of, yet they all have several things in common. Dojis also frequently feature big shadows. These factors, when taken together, provide a great deal of insight into the market and can show times of balance as well as extremes.

We can see that the move ended well into profit territory. For this strategy to work properly, the chart pattern that is broken must have a reliable reaction post-breakout and it must not be too close to your current entry point. What is the best strategy for binary options? Similarly, if the tail of a candlestick is longer than its wick, it means that the market sellers were active during the trading session. This pattern is formed when the closing and opening price of an asset is at the same lower level. The Evening Star is the exact opposite of the morning star.

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