Let's talk about the pros and cons of the bearish and bullish engulfing pattern.
Pros
- It's based on the simple principle of what goes up, will go down.
- A continuous uptrend often means there's going to be a decline in price eventually.
- It's easy to identify the engulfing pattern.
Cons
- There's no guarantee that a continuous uptrend is followed by a drop in price.
- Streaks of continuous increase or decrease might take longer than this pattern predicts.
Bullish harami
A bullish harami pattern starts with days of increase in price and as the days go on, the percentage of increase slows down. Typically, this means that buyers become hesitant to trade this specific asset. The most important element of this pattern is to see what happens next; if the price starts declining the pattern's prediction is that it will continue to go down. On the other hand, if the price rises, it will keep increasing.
Bearish harami
Similar to the engulfing pattern, the bearish harami pattern is the opposite of bullish harami. How does it work then? Normally, there's a number of consecutive days that the price drops and traders become hesitant to sell. This often leads to a small increase in price. What might happen next? Will the price go up? If so, the price is going to continue this way. But if the price goes down (you guessed it), it's most likely the price will drop.
Let's take a look at the pros and cons of these patterns:
Pros
- They are easy to recognize by identifying the cross.
- The theory is simple to comprehend and apply.
Cons
- The fact that you have to wait before investing to identify the pattern might put off many traders.
How to use candlestick patterns the right way?
There are various tools that can help you analyze charts with candlesticks.
For example, you can analyze candlestick patterns using TradingView. It's a great tool, though many newcomers find it a bit challenging. Using different drawing tools, you can look for patterns on the chart, which also requires an understanding of the chart itself.
The good news is that there are top-notch brokers with excellent trading platforms out there that do the heavy lifting for you and alert you when such patterns appear.
Why should you perform candlestick analysis on your own when you can simply register with a broker that provides this kind of analysis and helps you identify candlestick patterns like the ones we described above in minimum time and effort?
Let's talk about three brokers that provide features related to candlestick patterns.
Exness
Exness is a reputable broker that thousands of professional traders trust. Exness provides a variety of products and some unique features to help traders reach their full potential. You can trade stocks, cryptocurrencies, commodities, forex and indices. You can opt to trade through the Exness Terminal platform where you have access to candlestick charts, as well as a variety of other customizable tools, to help you focus on what you are most interested in, all achievable with a few clicks.
Tickmill
Tickmill is known for the research and analysis tools it provides to its users. They offer different trading products including forex, bonds, commodities, stocks and crypto. With their Forex calculators and signal center you can simplify your trading process and quickly lock your positions.
BDSwiss
This is another broker to take into consideration before you decide on which broker you opt for. They offer different trading products from indices and forex to crypto. With BDSWISS, you'll be able to market research analysis reviews, technical analyses and daily videos with insightful breakdowns about the market.
Summing up
There are a few ways to separate the amateur traders from the real pros.
An easy one is whether a trader is able to do data analysis and draw conclusions, more specifically to notice candlestick patterns and stay on top of upcoming changes in price. This will give you the edge as a day trader and you'll be steps ahead of other traders.