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How to spot when the market is about to change direction


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Today I want to show you a simple candlestick pattern that often forms just before the market changes direction.

Published in: Economy & Finance, Business
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How to spot when the market is about to change direction

  1. 1. How to spot when the marketis about to change direction.If you are one of these traders who choose to just trade the basiccandlestick chart and havent moved onto trading ichimoku yet , or ifyou just feel you aint quite ready, there is a few things I can help youwith.One of those things is spotting when the market is about to changedirection. You can do this with just a normal candlestick chart andits dead easy!So today I want to show you a simple candlestick pattern that oftenforms just before the market changes direction.As with most basic candlestick patterns, they seem to work best withlonger time frames,such as the 1 Hour, 4 hours or Daily charts.The problem with the smaller timeframes is they tend to be a little tooerratic and unpredictable, so I would personally stay away from tradingthem.So what do we nee to look out for?Look at this image below
  2. 2. This is a full red body candle with hardly any wick, this is a very clearbearish candle, however some candlesticks are not as clear and obviousas this one.Some candlesticks can show indesicion in the market, they showneither buyers nor seller are in control.This is the point when the market direction can often change.Lets look at a chartThis is the USDJPY 1 Hour candlestick chart.As you can see the USD is rising on the left hand side of the chart, thenit hits an indecisive candlestick,
  3. 3. then it changes from BULLISH to BEARISH.Can you see the indecisive candlestick?This indecisive candle is sometimes called a hammerIts easy to remember as it looks a bit like one...As you can see, it has a very short candle body and a very long wickunderneath it.This means price has moved down far from below the body, and thenback up closing near to the opening price.So if you can spot this candlestick as it happens on the chart, it can be agreat heads up that there is an indecision in the market.Thats because it shows you the price went much lower then the openingand closing prices. and thats why this is often a bearish signal in anuptrend, It tells you that the market could be about to change direction,and head down after the upward move.So if you ever see one, it is often best to wait for the next
  4. 4. candlestick to confirm the market direction.So go ahead and have a look at your chart and see if you can spot anyhammers on your chart, and watch out for them in your trading.Until next timeChris(admin)