The Truth About Candlestick Analysis
When Forex traders first start out they usually learn about candlesticks.But what they learn is usually useless.
They normally see a list of “candle patterns” like the one below. Each pattern has a set in stone definition and that is the only meaning it can have.
This is not candlestick analysis, it is pattern recognition.
And for a price action trader, it is useless.
Actually, it is worse than useless. Thinking about candles as just patterns is counterproductive. It makes you a worse trader, it leads you to make massive mistakes.
Why?
Giving a pattern a set definition leads to tunnel vision. When you see that specific pattern, you assume that something will happen.
But that is not how candlesticks work.
All candlesticks need to be assessed based on the candlesticks around them, and many other factors.
Below is a candlestick pattern commonly called a “spinning top”.
Normally people say that a spinning top means a reversal is imminent, which can be true. However, this same pattern can also mean that a continuation is imminent. It can mean that price is temporarily stalling.
It can mean a lot of different things.
Thinking of candles as simple patterns is the wrong way to do things.
You need to look beyond the pattern and read the story of price.
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