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Reversal Patterns

There are some types of reversal candlestick patterns in forex trading. They are the followings:

• Dark Cloud Cover
• Engulfing
• Evening Star
• Harami
• Morning Star Doji
• Piercing Line
• Three Black Crows
• Three White Soldiers

Dark Cloud Cover pattern

In an uptrend the market gaps open, but loses ground to fall below the midpoint of the previous day. The Dark Cloud Cover pattern suggests an opportunity for the shorts to capitalize on the next day's open: a warning sign to bullish investors. This candlestick pattern is the opposite of the Piercing Line pattern.

• A white body followed by a black body.
• The black body passes the midpoint of the prior white body.
• This candlestick pattern occurs in an uptrend.

Note: Bearish trend and High reliability

Engulfing pattern

An engulfing occurs when the candle body engulfs the previous candles body. White engulfing candles are bullish engulfings, where as black engulfing candles are bearish engulfings. Bullish engulfings are commonly found at short term bottoms, where as bearish engulfings at tops. Many candlesticks, such as dojis, hammers, hanging mans need confirmation of a trend change with an engulfing (bullish engulfing at bottoms, bearish engulfings at tops).

Occurring in a downtrend, the Engulfing depicts an opening at a new low, followed by a high buy-in that closes at or above the previous day's open. This signifies that the downtrend has lost momentum and the bulls may be gaining strength.

• The first day's color indicates the trend of the trading day.
• The second real body should have the opposite color of the first real body.
• The second day's body should completely engulf the previous day's body.

Note: Bearish trend and Moderate reliability

Occurring in an uptrend, the Engulfing depicts an opening at a new high, followed by a high volume sell-off that closes at or below the previous day's open. This signifies that the uptrend has been hurt and the bears may be gaining strength.

• The first day's color indicates the trend of the trading day.
• The second real body should have the opposite color of the first real body.
• The second day's body should completely engulf the previous day's body.

Note: Bullish trend and Moderate reliability

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