Dark Clouds May Bring Showers Of Money
Dark clouds not only indicate that rain is likely to fall. Dark clouds are patterns that often appear in Forex charts. When they develop, they suggest that a reversal is going to happen. In other words a trend is going to finalize and a new one is going to start.
One of the keys to accomplishing gains in the currency market is to know how to differentiate between reversals and retracements. Failing to distinguish price exhaustion and reversals may bring losses.
Some of the common patterns that help a trader assess the type of movement they’re viewing include the evening star, piercing lines, and dark cloud cover to name a few.
The dark cloud cover is a pattern that usually forms in a candlestick chart, during times when the currency is trending to the upside. At those times, a trader may observe that the market gaps open up, although they quickly lose ground. Soon thereafter, the currency drops below the midpoint from the prior day. This pattern offers foreign exchange trading participants the chance to exploit the prices of the following day. The pattern’s development is a sign for hawkish investors to open their positions.
With a dark cloud cover, you’ll see that a white candlestick is followed by a black one; the black candlestick goes beyond the midpoint of the previous day. And lastly, dark cloud covers only show up during uptrends.
A brief review of Forex analysis may help you comprehend chart patterns.
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Filed under: investing online | Tagged: currency market, foreign exchange, foreign exchange trading, forex, forex charts