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 looks mildly offered below 1.1750
EUR/USD comes under some mild selling pressure on Friday, partially fading Thursday’s strong pullback and revisiting the 1.1740 region on the back of a humble recovery in the US Dollar. Later in the day, investors’ attention will be on the release of US flash PMIs for the month of January.
GBP/USD flirts with two-week tops around 1.3530
GBP/USD extends its weekly firm performance and challenges the area of two-week peaks around 1.3530 on the back of a tepid bounce in the Greenback. Positive results from UK Retail Sales and preliminary PMIs appear to reinforce Cable's solid gains so far on Friday.
USD/JPY falls sharply following a jump above 159.00 after BoJ
USD/JPY declins sharply toward 158.00 after rising above 159.00 in the European session on Friday. The Bank of Japan left its monetary policy settings unchanged following the first policy meeting of the year, as expected, but Governor Ueda noted a weak Japanese Yen could lead to a rise in import costs and be passed on to domestic prices.
Editors’ Picks
EUR/USD looks mildly offered below 1.1750
EUR/USD comes under some mild selling pressure on Friday, partially fading Thursday’s strong pullback and revisiting the 1.1740 region on the back of a humble recovery in the US Dollar. Later in the day, investors’ attention will be on the release of US flash PMIs for the month of January.
Gold shifts its focus to $5,000
Gold prices hit a record high near $4,970 per troy ounce earlier on Friday, leaving the door wide open to a potential test of the key $5,000 barrier. The Greenback’s inconclusive price action and shrinking US Treasury yields across the curve add to the yellow metal’s rally so far on Friday.
GBP/USD flirts with two-week tops around 1.3530
GBP/USD extends its weekly firm performance and challenges the area of two-week peaks around 1.3530 on the back of a tepid bounce in the Greenback. Positive results from UK Retail Sales and preliminary PMIs appear to reinforce Cable's solid gains so far on Friday.
Bitcoin, Ethereum, and XRP face elevated downside risk amid weak technical setups
Bitcoin is struggling to stay above support at $89,000 at the time of writing, as headwinds intensify across the cryptocurrency market on Friday. Ethereum and Ripple are facing low retail and institutional demand, while bearish indicators continue to flash subtle signals that losses may extend further.
Week ahead – Fed and BoC meet amid geopolitical upheaval and Trump’s Fed pick
Fed to likely go on pause after three straight cuts. BoC is also expected to stand pat. But will Trump steal the limelight by revealing his Fed chair nomination?
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