Most Important Price Action Patterns Every Trader Must-Know

Posted on Thursday, 12 Nov 2020 By Admin

 Most Important Price Action Patterns Every Trader Must-Know

Important Price Action patterns, also known as "triggers", "setup" or "signals" provide traders with valid evidence on the next movement of prices.

Here are some important but simple Price Action patterns that can be used for trading.

Marubozu Candle Pattern

Marubozu candles are also known as strength candles. It shows very strong buying and selling forces that often occur in strong bull or bear markets. This is one of the Japanese candles in forex that gets the most attention.

What is Marubozu Candle?

Mazubora in Japanese means "bald". In a Japanese candlestick chart, a Mazuboru candle (also a Beard / No-Wick Candle) is a candle with no shadow but only a long body, that is, a candle with only the opening and closing price. At this point, the opening and closing prices coincided with the session high or low.

Bullish Mazuboru (Bullish Mazuboru) candlestick (green or white body) has no upper shadow because the opening price coincided with the session low, while the closing price coincided with the session high. This is a strong bullish candlestick pattern, showing that the buyers were in complete control of the session. It is usually the first sign of a further upside or a reversal from bearish to bullish.

Bearish Mazuboru (Bearish Mazuboru) (red or black body) has no upper shadow because the opening price coincided with the session high, while the closing price coincided with the session low. This is a strong bearish candlestick pattern, showing that sellers were in complete control of the session. It is usually the first sign of a further decline or a reversal from bullish to bearish.

Inside Bar pattern

The Inside Bar pattern consists of 2 candles including the inside bar and 1 previous candle, often referred to as the "mother bar". The inside candle should be completely inside the high and low of the mother bar. This pattern is often used to trade the breakout in a trending market, but it is also understood as a reversal signal if formed at an important price.

   

Pin Bar pattern

The Pin Bar pattern consists of only 1 single candle indicating price rejection and market reversal. The Pin Bar signal is very good when the market has a trend, range-bound, or can be traded against the trend at important support and resistance levels. This pattern implies that the price can go in the opposite direction of the tail just because it shows price rejection and reversal.

   

Fakey pattern

The fakey pattern includes a false breakout of the inside bar pattern. In other words, if the inside bar pattern breaks but turns the head and the candle closes inside the body of the mother bar or inside a bar, it is a fakey pattern. The market seems to want to break in one direction but then turn around and move in the opposite direction. fakey is very suitable when trading in the direction of the trend, against the trend, or in the price range (range).

   

Trade with price action patterns

Let's see real examples of trading using price action models.

The first chart shows a bearish fakey sell signal. In this example, the trend is down from the upper left of the chart. Fakey sell signals are consistent with the main trend. Trend trading using price action setups always has a greater probability of success.

The chart below is an example of a setup consisting of fakey price increases and pin bars in the context of an increasing main trend. Normally, when the market is having a strong short-term trend, traders should trade with that short-term trend.

The following example is the inside bar model. The chart shows both a normal inside bar pattern and an inside bar model incorporating a pin bar (the inside bar is also a pin bar). This pattern is very good when the market is trending.

The final chart is a pin bar model. Watch out for a very strong movement of the market after the pin bar. Pin bar has quite a long tail compared to other bars, it can be considered as a pin bar. The long-tail pin bars protruding from the neighboring price areas as in the following two cases are good opportunities for trading.

Transactions where the price model converges

Signal trading price patterns are not only based on the patterns themselves, but also on the association where the price range it forms. Each pin bar, inside bar…. are not the same. Depending on the price range it forms, traders may want to trade or stay out.

The best price action signals are formed at confluence points of the market. The chart below is a clear example of a pin bar at the confluence. It is formed along with an uptrend of the market at an important support level. So this is the confluence area of ​​the trend and the support level makes the pin bar more valuable. The more confluence factors that support the better the signal to trade.

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