Basics Of a Piercing Pattern You Should Consider In Your Forex Training

As you may have learnt on your FOREX TRADING COURSE, the piercing pattern is another dual candle reversal pattern. In this article we are going to discuss the basics of this patterns which should assist you in your on-going FOREX TRAINING, especially if you are a beginner to Forex trading.

As we mentioned above, the piercing pattern is made up of two candles. The first, black candle is a strong candle with an open and a close near its highs and lows. The second, white candle is also a strong candle with the open and a close near its lows and highs. Ideally, the white candle will open below the prior black candle's low and close well into its real body. Similarly to its counterpart (the dark cloud cover) some Forex traders look for the white candle's close to be more tha
50% into the prior black candle's real body. This signifies that the bulls are firmly in control hence providing a great buying opportunity. Whilst this rule is not set in stone in Forex training, it is up to you to analyse the surrounding market conditions and confirm if this rule suits your Forex trading style. If you are a beginner to Forex trading then sticking to this rule should be sufficient, making the piercing pattern a strong bottom reversal pattern for you.

To fully understand the piercing pattern an understanding of its market psychology is required. The market is a down-trend on our daily chart and has been declining for around 3 weeks. The tempo of the down movement is re-enforced by the strong black candle with the open and the close near it's highs and lows. The following day, the market gaps down and opens below the lows of the prior session. The bears are still happy with their power over the bulls. However, the session soon changes shape and closes above yesterdays candle – ideally 50% into its black, real body. The bears are now looking to close their position as the pressure by the bulls is far too great. The bulls are now looking for buying positions as the strong white candle produced in today's session signifies they are now in the driving seat.

Similarly to the dark cloud cover, the piercing pattern has another use. Whilst the dark cloud cover is used to establish a resistance line, the piercing pattern is used to draw a support line. We do this by simply drawing a straight line across our charts which is placed at the lowest low out of the two candles. In a simple example, the lowest low will be the low of the second, white candle.

When using this pattern to execute trades, try not to trade the initial piercing line pattern. Any credible Forex trading course should teach you to be patient and wait for the price to test the support level you have drawn - again. This may take a while on a daily chart but it will be worth it. If the price tests this level again and does not penetrate it but rather bounces upwards, a great buying opportunity may well be before your eyes. Again, analyse the surrounding market conditions first and be 100% sure that this is a great trade for you to take. If the support line is penetrated, look for buying opportunities elsewhere.