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 faces next resistance near 1.1930
EUR/USD has surrendered its earlier intraday advance on Thursday and is now hovering uncomfortably around the 1.1860 region amid modest gains in the US Dolla. Moving forward, markets are exoected to closely follow Friday’s release of US CPI data.
GBP/USD change course, nears 1.3600
GBP/USD gives away its daily gains and recedes toward the low-1.3600s on Thursday. Indeed, Cable now struggles to regain some upside traction on the back of the sudden bout of buying interest in the Greenback. In the meantime, investors continue to assess a string of underwhelming UK data releases released earlier in the day.
USD/JPY consolidates around 153.00 favoured by lower Fed easing bets
USD/JPY steadies around 153.00 after hitting two-week lows at 152.25. A strong US Nonfarm Payrolls report provided some support for the US Dollar on Wednesday. The Yen remains on track for a 2.6% weekly rally, boosted by Takaichi's victory at Sunday's elections.
Editors’ Picks
AUD/USD: Some profit-taking should not be ruled out
AUD/USD has quickly faded Wednesday’s strong advance despite climbing to new multi-year highs around 0.7150 earlier on Thursday. The pair’s decline comes amid a marginal uptick in the US Dollar, while investors gear up for US CPI data and relevant Chinese releases on Friday.
EUR/USD faces next resistance near 1.1930
EUR/USD has surrendered its earlier intraday advance on Thursday and is now hovering uncomfortably around the 1.1860 region amid modest gains in the US Dolla. Moving forward, markets are exoected to closely follow Friday’s release of US CPI data.
Gold plunges on sudden US Dollar demand
Gold drops markedly on Thursday, challenging the $4,900 mark per troy ounce following a firm bounce in the US Dollar and amid a steep sell-off on Wall Street, with losses led by the tech and housing sectors.
Ripple collaborates with Aviva Investors to tokenize funds as XRP interest declines
Ripple (XRP) exhibits subtle recovery signs, trading slightly above $1.40 at the time of writing on Thursday, as crypto prices broadly edge higher. Despite the metered uptick, risk-off sentiment remains a concern across the crypto market, as retail and institutional interest dwindle.
A tale of two labour markets: Headline strength masks underlying weakness
Undoubtedly, yesterday’s delayed US January jobs report delivered a strong headline – one that surpassed most estimates. However, optimism quickly faded amid sobering benchmark revisions.
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