A certain fictional All American halfback, war hero and shrimp boat captain might say that candlesticks and scalping go like peas and carrots(if that fictional character also dabbled in Forex scalping).  Candlesticks give greater credence to the price range of a given time period than the price close itself.  Why is this so important?  “Wicking” (aka a doji pattern) of the candlesticks, are rejected moves in price, and signal where buyers and sellers roam. 

These failed movements in price provide a clue that short term momentum is waning, and a reversal could be in the works.  Other price failure indications include: engulfing patterns (a large, solid candle opposite of its preceding one), morningstar/abandoned baby patterns (rarer three candle reversal patterns) and cloud cover patterns (two candle pattern that fills and closes gaps).  Here are some guidelines to pair with Candlestick charting when Forex scalping to take advantage of these reversal patterns, and minimize false signals.

When you encounter any of the aforementioned reversal patterns, ask yourself, “where is this occurring.”  Even as a short term scalper, you must identify longer term support and resistance levels of importance.  Are we retesting a previous low?  Is this price a daily Fibonacci retracement/projection level?  Is this price testing a long term trendline support/resistance level?  If the answer is yes, proceed with the reversal scalp as long as your personal indicators can confirm the reversal.  If the answer is no, wait and watch, as this could be a simple pause in a sustained move forward.  Forex scalping is as much art as science in this respect.

If you are scalping on a 15 minute or shorter time frame, consider waiting for two dojis, or “wicks” before playing the price reversal.  This holds especially true if the wicks are relatively short.  The idea is to minimize the risk of mere price hesitation, and you being on the wrong side of a breakout.  The downside to doing this is that potentially lucrative reversals are missed, but risk management supersedes potential profit.

Finally, pay attention to any doji patterns in relation to some common moving average lines.  The 10 period Simple Moving Average and 20 period Exponential Moving Average are great indicators in determining price reversal.  For example, if the price is in an uptrend and a “hanging man” doji appears while the price is above an upward facing 20 SMA, consider this a sign of trend continuation, not reversal.

Consider this motto as you scalp, “mind your 'Stick, watch for wicks, enter there and then get out quick”