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 plummets to 1.1840 on US NFP
EUR/USD’s selling momentum now picks up pace and rapidly hits the 1.1840 region on Wednesday. Indeed, the pair’s decline comes amid rising buying pressure on the US Dollar in the wake of firmer-than-expected results from US NFP in January.
GBP/USD approaches 1.3600 on USD-buying
GBP/USD adds to Tuesday’s pullback and trades closer to the 1.3600 support on Wednesday. That said, Cable’s extra downside traction comes against the backdrop of renewed strength in the Greenback as investors assess the latest US NFP data.
USD/JPY remains heavy around 153.00 on firmer Japanese Yen
USD/JPY is sustaining its three-day rout at around 153.00 in the European session on Wednesday, awaiting the closely-watched US NFP report. Rising bets on Fed rate cuts keep the US Dollar depressed. In contrast, expectations that PM Takaichi's policies will boost the economy and allow the BoJ to stick to its hawkish stance bolster the Japanese Yen, weighing on the pair amid intervention fears.
Editors’ Picks
EUR/USD plummets to 1.1840 on US NFP
EUR/USD’s selling momentum now picks up pace and rapidly hits the 1.1840 region on Wednesday. Indeed, the pair’s decline comes amid rising buying pressure on the US Dollar in the wake of firmer-than-expected results from US NFP in January.
GBP/USD approaches 1.3600 on USD-buying
GBP/USD adds to Tuesday’s pullback and trades closer to the 1.3600 support on Wednesday. That said, Cable’s extra downside traction comes against the backdrop of renewed strength in the Greenback as investors assess the latest US NFP data.
Gold trims gains post-NFP, targets $5,000
Gold rapidly reverses initial gains and retreats to the vicinity of the $5,000 region per troy ounce amid further gains in the Greenback and rising US Treasury yields, all following the latest US NFP readings.
Ripple Price Forecast: XRP sell-side pressure intensifies despite surge in addresses transacting on-chain
Ripple (XRP) is edging lower around $1.36 at the time of writing on Wednesday, weighed down by low retail interest and macroeconomic uncertainty, which is accelerating risk-off sentiment.
US jobs data surprises to the upside, boosts stocks but pushes back Fed rate cut expectations
This was an unusual payrolls report for two reasons. Firstly, because it was released on Wednesday, and secondly, because it included the 2025 revisions alongside the January NFP figure.
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