Real-time candlestick patterns are a powerful tool for reading market movements and making informed trading decisions. Still, there are thousands of patterns out there and so overwhelming to know which is truly essential for trading success.
Let’s cut through the noise – here’s where we concentrate on only the two key candlestick patterns you need to win: Pin Bars and Engulfing Candles. In fact, we will introduce you to a free Expert Advisor (EA), which will automatically detect these patterns for you, which will make your trading even more efficient.
With so many different patterns to learn and evaluate, a trader often finds it challenging to know which candlestick patterns to pay attention to. He also finds it quite challenging to manually spot most of these patterns, as seeing one needle in a haystack could be considered an easier process than spotting the same of these candlestick patterns.
The secret is to simplify the method by focusing only on two significant candlestick patterns, namely Pin Bars and Engulfing Candles. These patterns are easy to understand and frequently give lucid signals for market entries and exits. However, to make the process even more straightforward, we would introduce a free EA tool that would be able to detect these patterns automatically for you on your trading platform.
By focusing on Pin Bars and Engulfing Candles, and using the EA tool to automate pattern recognition, you will save a lot of time and will massively improve your ability to spot profitable trading opportunities. Let’s dive deeper into these patterns and show you how to set up the EA tool to streamline your trading experience.
What are Candlestick Patterns?
Now, before we go into Pin Bars and Engulfing Candles in detail, we take a brief glance at candlestick patterns. Candlestick patterns are essentially configurations on the price chart that graphically represent how the price of any asset moved for some period of time or duration. These patterns inform whether a trend will continue or break, and they are, therefore, important indicators for traders. They may signify either the bullish or bearish momentum in the markets.
Pin Bars: The Bullish Key Reversal Pattern
What is a Pin Bar?
A Pin Bar is one form of candlestick pattern that indicates a reversal of the market. It has got a small body and a long wick on either one side of the body. A long wick also signifies that price tried to travel in one direction but was rejected, and it is probable that the market might be near reversing its direction.
Pin Bar Bullish
In a bullish Pin Bar, the long wick is given below the body of a candle where sellers try to push the price down and were not able to do so. This failure indicates the resumption of control of buyers and the price is most likely to rise. It very often appears near the support levels and that increases its power.
Bearish Pin Bar
On the case of a bearish Pin Bar, the long wick extends above the body of the candle, meaning that buyers simply could not break the strength of the sellers and take the prices up. This is very likely to translate to falling prices. Bearish Pin Bars are typically observed at resistance levels.
Engulfing Candles: A Strong Reversal Indicator
What is an Engulfing Candle?
An Engulfing Candle pattern contains two candlesticks. The second candle in the pattern “engulfs” the first candle; that is, the body of the second candle is of larger volume and engulfed, fully encompasses the body of the previous candle. A pattern such as this is a strong indicator for a turn as it reflects a drastic shift in market sentiment.
Bullish Engulfing Candle
A bullish Engulfing Candle is formed after a downtrend. The pattern starts with a small bearish candle, followed by a large bullish candle that engulfs the first candle body. This results in showing that the buyers have entered and are now overpowering the sellers, meaning there could be a reversal in an upward trend.
Bearish Engulfing Candle
When it is a bearish Engulfing Candle, the pattern occurs during an uptrend. The first of the candles is a small bullish candle, and the second one is a larger bearish candle that engulfs the former. Therefore, that suggests sellers have taken control and that another downward trend might be appearing.
The Problem with Manual Pattern Recognition
Manual detection of Pin Bars and Engulfing Candles can be quite difficult because they would require to be viewed through many markets and timeframes. The patterns sometimes appear in one chart but will not be seen in others. Therefore, it becomes quite tedious checking everything on your own. This is where automated tools come into play.
Free EA Tool for Pin Bars and Engulfing Candles
The good news is, there is a solution to the manual pattern spotting problem – the free EA tool of How to Trade. You can use it for automatically identifying Pin Bars and Engulfing Candles across various markets and timeframes. This saves you a lot of time and gives you the added advantage of never missing a potential trade setup.
How to Set Up the EA Tool
Download the EA Tool:
- Go to How to Trade, open the “Tools and Automation” section.
- Download the Pattern Finder tool for your platform either MT4 or MT5.
Extract and Install:
- After you downloaded, extract the files from which you will copy the necessary EA files to the “Experts” folder of your installed MT4/MT5.
Enable EA Trading:
- Log in to your platform and make sure the EA trading is enabled by checking the options for “Allow Automated Trading” and “Allow DLL Imports” in your settings.
Load the EA on a Chart:
- Drag the Pattern Finder EA over any chart and set up how you want the EA to recognize which patterns to detect (Pin Bars, Engulfing Candles) and which timeframes you want it to monitor.
Start Scanning:
- Once an EA is setup, it will begin scanning the markets you have chosen in real-time to look for the Pin Bar and Engulfing Candle patterns.
- Alerts may be customised so that you can be notified every time the EA has identified a new pattern.
Mixing Candle Patterns with Support/Resistance
While the Pin Bar and Engulfing Candlestick patterns are already strong enough on their own, they are all that much stronger when supporting and resisting levels are incorporated. When a Pin Bar or Engulfing Candle forms close to a support or resistance level, this also is something extra confirming that the market is more likely to reverse in that area.
For instance, a bullish Pin Bar near a support level often suggests a good buying opportunity, while a bearish Engulfing Candle near a resistance level indicates a selling opportunity.
Conclusion
You can simplify your trading system and enhance your possibilities of trading profitable setups by focusing on just these two candlestick patterns, Pin Bars, and Engulfing Candles. Finally, you will not need to manually scan charts for these structures anymore; an EA tool will do this work for you, freeing you to make confident trading decisions.
Start right now! Use the EA today and make your trading easier to identify those effective patterns of candlesticks
