Based on the many emails we receive about this, there is a requirement to get a proper understanding of how exhaustion candles work, what they mean and when they're relevant. In the webinar in the video below, Navin Prithyani will go into details with many examples of when an exhaustion candle / pin bars are relevant.
What are Exhaustion Candles?
An exhaustion candle is a very important indicator of a reversal of a trend. It is sometimes also called a hammer and it is named like this, because the market is attempting to hammer out a market bottom (if it is a downtrend).
How to recognise an exhaustion candle: it appears during a trend (either up or down) only. The body of the candle has a long tail or wick - at least 2-3 times the length of the body and little if any tail or wick on the other side. The colour of the body does not matter as much.
How you can use Exhaustion Candles
Exhaustion candles are not to be used as a leading indicator to enter a trade solely based on them. There is however, a huge amount of information embedded in them. They give some clues as to what is happening in the market and what the current sentiment is. They can be an indication that the trend is stalling or even reversing. However, as said, it's just an indication and nothing more. So we need more confirmation than that.
Firstly we need the exhaustion candle to be, or occur in the right place in your charts. So for instance you want to see them bouncing at round numbers, pivot points or recent highs and lows. Our Pro Trading Strategy for instance, uses exhaustion candles as a tool to determine entry. Never look at these kind of technical tools as more than tools. As mentioned often by us, we need the story to match our technical side of things. This is something we extensively dig into in the Urban Forex members courses.
Watch the video above for the full lesson so you can continue to enhance your skills and be better everyday.
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Editors’ Picks
EUR/USD bounces off lows, back near 1.1330
EUR/USD meets daily support around the 1.1300 neighbourhood, managing to regain pace and revisit the 1.1330 region. Sentiment turned after President Trump proposed a “straight 50% tariff” on European imports, undermining the pair’s bullish momentum.
GBP/USD eases from tops, revisits the 1.3500 zone
GBP/USD benefits from broad US Dollar weakness, climbing to its highest level since February 2022 past 1.3500 at the end of the week. UK retail sales data surprised to the upside in April, lending extra wings to the quid.
USD/JPY slips as Japan’s core inflation hits two-year high
The Japanese Yen extends gains, with USD/JPY falling to near 143.00 during European hours on Friday. Japan’s core CPI rises 3.5% YoY in April, the highest in two years and above expectations. Headline inflation stands at 3.6%, the same as the previous month and the lowest since December.
Editors’ Picks
EUR/USD bounces off lows, back near 1.1330
EUR/USD meets daily support around the 1.1300 neighbourhood, managing to regain pace and revisit the 1.1330 region. Sentiment turned after President Trump proposed a “straight 50% tariff” on European imports, undermining the pair’s bullish momentum.
GBP/USD eases from tops, revisits the 1.3500 zone
GBP/USD benefits from broad US Dollar weakness, climbing to its highest level since February 2022 past 1.3500 at the end of the week. UK retail sales data surprised to the upside in April, lending extra wings to the quid.
Gold keeps the bullish tone near $3,350
Gold extends its weekly advance, trading around $3,350 per troy ounce on Friday. The rally in XAU/USD is driven by broad-based weakness in the Greenback, particulalry after President Trump’s threat to impose 50% tariffs on European imports.
Apple stock sinks below $200 after Trump threatens more tariffs Premium
Trump grows irate at Apple's move into India. President claims Apple must produce US-sold iPhone in US or face a 25% tariff. US equity futures slip more than 1% in Friday premarket after Trump threatens the EU with a 50% tariff.
Ripple Price Prediction: Whale accumulation sparks hope as rising exchange reserves signal caution
XRP sustains mid-week recovery as XRP/BTC flashes golden cross for the first time since 2017. Large volume holders increase XRP exposure, indicating rising demand and investor confidence.
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