Candlestick V: Using Candlestick Patterns in a Range bound Market

In a range bound market - meaning a market that does not possess a clear directional trend, but rather moves back and forth between support and resistance - traders are essentially looking to short at the top of the range, and buy at the bottom of the range. It is worth noting that this strategy often results in limited profits, as it does not seem to rely on identifying a trend. Nevertheless it can be useful in capturing many small moves for the trader who can maintain discipline and self-control while trading this strategy.
Traders should start by identifying a range bound market.

Once the market is identified to be range bound, traders should look for oscillators suggesting overbought/oversold levels at support and/or resistance.
Traders should then look for a candlestick pattern that also suggests a reversal at the top/bottom of the market's range. When this has been identified, traders can enter once the reversal is confirmed.

Candlestick VI: Using Candlestick Patterns in Trending Markets

Using candlestick patterns to trade trending markets can be an extremely useful tool to profit from exchange rate movement. The process is simple:
Identify the overall trend

Look for a retracement
Look for a candlestick pattern to confirm a reversal at the retracement level

The candlestick pattern serves to confirm the fact that the market is acknowledging the importance of the retracement level. Traders should look to enter the position just outside of the reversal candle's range. At that point, there is sufficient reason to believe that the retracement is over and that the primary trend is ready to resume.

Candlestick VII: Candlestick Patterns Confirming Reversals

Candlestick patterns are used to confirm reversals. Often when a price moves towards a support or resistance level, it is unclear for several periods on the chart whether it is going to break through or reverse. Intraday penetrations of important technical levels are often misleading signals, but quick bounces off support can be false signals as well. Candlestick patterns offer a means of confirming that a price has reversed itself at a key technical level. They also provide a precise entry point and ensure that the market's momentum is in the direction of the trader's position at the time of entry.
In the chart below, the Euro has made its famous double top against the US dollar. The first relative high has been established, and although there are later several intraday breaks above this level, no daily candle has closed at a new high. Shortly after, a rapid fall from the 1.29 level creates a bearish engulfing pattern that allows the trader to sell the next day with the market's momentum to the downside. The stop is placed just above the black resistance level, because a further test of the recent highs could easily lead to a breakout higher.