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Candlestick Patterns: A Trading Strategy That Actually Works

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Candlestick Patterns: A Trading Strategy That Actually Works

hey hey what’s up my friend so welcome to today’s training on candlestick patterns here’s what you learn right number one we’ll talk about the biggest reason why traders lose money with candlestick patterns and how you can avoid it number two I want to share with you right the may formula so this is my own proprietary trading formula right there we’ll show you how to use candlestick patterns to identify profitable trading opportunities across different markets where is it for X where is it stocks but is it bonds right and also across different time frames as long as there is sufficient liquidity in the markets right this formula right you can apply the same and finally I want to share with you a few advanced price action techniques right that will help you improve your winning rate so this is something that I haven’t really talked much about right and I want to cover it in today’s video so really you’re gonna be in for a treat okay so with that saying right if this is the first time you’re watching this video or for the 10 time hit the thumbs up button smash it right now and subscribe to my youtube channel the link button is all below this way whenever I published a new training you’ll always be updated sounds good let’s get started first thing whenever you treat candlestick patterns right I don’t want you to make this mistake what is this mistake right look at this chart so when that’s Raider they look at this chart right they they learn all this candlestick patterns right no shooting star is bearish right a bearish engulfing pattern is bearish all right hammer is bullish blah blah blah and when you look at this right you can see that over here there’s a shooting star well supposed to be bearish right then the market rally another shooting star price declined slightly before it break up higher again then over here you have a somewhat of a bearish candle a bearish engulfing pattern price moves slightly higher then it really again over here you have something like a dot cover price barely move in move down lower before it breaks out higher again so you can see that this right over here the mistake that many traders make is that they look at this candlestick patterns and train them in isolation they simply study a candlestick pattern find out what’s the meaning behind it they memorize all this meaning and just train them blindly and when you do that right you can see that you’re gonna suffer loss of the loss of the loss so the first lesson that I want to share with you right now is this don’t trick candlestick patterns in isolation right there is a losing proposition so now you might be wondering okay Reina I shouldn’t treat candlestick patterns in isolation so what now well what you want to do is apply this right the may formula right if you apply this formula I can almost guarantee right there when you trick candlestick patterns that your results will be improved so what is this may formula let’s get started number one M it stands for market structure so generally when you treat the markets it can be broken down into three main categories in an uptrend a downtrend or reach sort of market let’s say in an uptrend look something like this right higher highs and higher lows downtrend is lower highs and lower lows and range is just something like this okay range where the highs and lows right are pretty much around the same area so now once you’ve identified the market structure it doesn’t mean you buy immediately for example let’s say the market is in an uptrend at this level over here do you want to buy it at this point not quite right you don’t want to buy just because the market is in an uptrend you do want to sell over here just a mark just because the market is in a downtrend why is that it’s because you want to look at number two area of value you want to be trading from an area of value so for example let me give you a few examples of area of failure so let’s talk about an uptrend so market is in an uptrend a few possible area of value could be this one over here I trip price retest previous resistance now becomes a pot that’s one possibility and area of value alternatively right the price can also retest previous swing low or previous supports or something like this uptrend marketing does a slight consolidation and retest this previous area of support this is another area of value and also another variation of it is that area value can be in the form of a moving average or trendline so market is in an uptrend okay and if you pull out let’s say a 50 ma you notice that the price tends to no respect this moving average over here all right usually in a healthy trainer it tends to respect the 50 period moving average so let me share with you a few examples okay so the first one it’s this one here you can see that here this is a pound yen you can see that this over here market is in a downtrend where’s the area of value the area of values over here okay previous support support breaks down right becomes previous support becomes resistance this is an area of value another example it’s this one here okay this is the thirty year Treasury bond okay you can see that in this case right it’s a healthy trend and the market tends to respect right the fifty period moving average which is this blue line over here the area of value okay a real value and this one over here area of value so remember I say area of value not line of failure so you’re dealing with an area on your chart and let me just give you one more example thing Bitcoin is pretty okay so if you look at Bitcoin another area of value to share this one over here price up broke out of this Heinz right almost retest this previous resistance to the pot then again right it broke up above this high scums back almost retesting this previous resistance than support and I come back down retest right now it’s back towards this area alright this is a support area then it has set a few times few times a few times before it finally don’t broke down so you can see that in an uptrend there are numerous ways to define your area of value okay and I want you to be aware of it so you can see over here right area of value the most common ones I usually support resistance moving average trend line okay and downtrend is just the opposite so now you have got your market structure your area of value what’s next this is where we move into the entry trigger so you can see that you know when you treat candlestick patterns you don’t just dive in straight needle candlestick patterns all right no you look at the context of the market before you look at the candlestick pattern so we have covered a couple of things market structure and area of failure and finally now we look at the entry trigger so this is where candlestick patterns shine because they are useful right to act as an entry trigger so an entry trigger is simply like a signal right get you into a tree okay and a couple of things you want to pay attention to is like for bullish patterns I believe the most common once you encounter is the hammer and bullish engulfing pattern and for bearish patterns right you you will usually encounter the shooting star and bearish engulfing pattern so these are the patterns that you saw earlier when I talked about the mistakes that trader make so just to walk you through right for those of you are not familiar so for a hammer this is where the price open open it is this level then the sellers already came into control and push the price all the way down lower you know this loose create this loose and finally the buyers sit now okay this is low enough right you’re not going any further all right let me just push the market back up higher in the buyers you know they came in to push the price back up all the way about up back towards the highs and finally closing near the highs of the day alright off for the time period so this is how you get a hammer and basically the story of a hammer is sellers came in need to control and suddenly the bias right came in and push the price all the way up up higher and you know smashing the sellers to to one corner so bullish engulfing pattern it’s a similar story you can see over here I price open here and then close near the lows of the time period then a mix candle the buyers open near the lows right that sellers try to push the price down low and near this lows but that’s as far as they could go before the fine the bias when all do you a buyer right pushing a price closing near the highs over here so you can see that I can write this tells you that the buyers are temporarily in control so for bearish patterns is just the opposite I’m not going to treat you like an idiot right you probably know where I’m gonna come from this simply tells you that the sellers are in control and you what you’re seeing is actually you know price rejection rejection of higher prices on your chart and this over here at are useful right s entry trigger to enter a tree I’ll share with you a few examples later on right so bear with me for now and the last component of the may formula is exits okay exit when you’re wrong so basically where you set your stop loss and exit when you’re right when you take profit so there are many ways you can go about you know setting your stop-loss setting on take profit levels so I’m just going to go with an approach right that has worked well for me right so there are many ways to take this I’ll limit you to explore to validate to verify it for yourself but right now I just want to share with you an approach right that has worked well for me so when it comes to stop-loss okay remember okay you do not know this yet but we will be trading from an array of value I’ll share with you a few examples later so when you set your stop-loss you want to set your stop loss away from the area of venue you don’t put it smack in the area of value because that’s that kind of defeat the person right what’s the point of trading from an area value if your stop-loss is making it a real value so let me give an example let’s say market is in a range K comes down near this lows right then it breaks out higher closing near closing above resistance or above support okay so when you set your stop loss okay when you set it right let me just highlight it this in rate so you can see okay so you don’t set your stop loss at this level you’d want to set it here and you don’t set it here why because remember we are trading from an area of value an area of value is where in this case right potential buying pressure could come in and push the price up higher so if you put your stop-loss over here that is a sell stop order it’s like saying you know you want to sell at this price right to get out of the trade which doesn’t make sense because you know this is an area where potential buying pressure could come in it’s an area on your channel and you want to give the trade room to breathe you wanna give it no yeah enough room to wiggle so you don’t get stopped up you know too early so my approach I usually set my stop-loss right away from the area of value usually somewhere about here let me just change this to blue so you can see where I usually do it somewhere about here and the exact level is using the average true range indicator 180 are below this low if you do not know how to do it right I’ll share with you an example later on as well so usually my stops is over here alright and if I’m shopping near the highest of resistance my stop-loss it’ll be somewhere here or I can see that there’s a buffer a distance away from the area of value so this is how I set my stop loss now what about exit when you are right where do you take profit so let me just share with you right so there are many ways you can do this depending on your trading goal whether you want to capture a swing whether you want to write a train okay so generally if let’s talk about swing trading right you just want to capture one swing in the markets usually want to do it when before the opposing pressure comes in so again an example let’s say market is in a trend that was her in a range okay and you bought near the lows over here okay ask yourself right if you buy near support where would selling pressure come in well chances are selling pressure is gonna come in somewhere near this area of resistance right somewhere about here so when you take profit right you just want to exit right just before this highs over here so in other words are capturing a swing you capture this portion of the move just this one swing if the market swings up higher you exit the trade capturing this one swing over here okay so this is where you exit your trick just before opposing pressure comes in okay so right now if you’ve learned the main formula right market structure a real value entry trigger n exists so let me walk you through a few examples right you kind of you know and can encapsulate right what you have just lit okay first one let’s look at pound dollar so pound dollar okay so you can see over here look at this chat let me all this out up or cherry-pick right these are traits that I trade them their cherry-pick right to explain the example there will be winners there will be losers but bear in mind when you treat them on their movers okay there will be losers so don’t you shove it it’s a loss right of course there’s gonna be losses right Trading it’s no hundred percent thing okay so first thing first right pound dollar looking at this chump what do you see that is this market what’s the trend well train is down okay so that’s the first thing right listen what mucky structure M train is down second one area of value where is the area of value well I see this one over here this area of resistance is an area of value so every or value let’s call it R resistance II is there an entry trigger so from what I’m seeing over here oh this looks like a bearish engulfing pattern telling me that the sellers are temporarily in control so yes we have a entry trigger right let me just call it B right bearish engulfing pattern okay so exits right let somebody exits now right let’s call it a no space let’s do it here II what about your exits so first let’s talk about stop-loss so remember I don’t like to set my stop loss right just above the highs because the price could just you know really up higher and then collapse down lower and if I just set it above the highs I would get stopped out so what I usually do is again write ATR indicator I just go to indicator pull out ATR click on this right I usually have a 20 period ATR so I’ll just you know go with my standard default and it’s usually SME but trust me is not gonna make much of the difference you know whether you follow my settings or not and you can look at this right right now from the looks of this chart the ATR is about 80 pips right now okay so this tells you that historically for pound/dollar on the daily timeframe right over the last 20 days it has moved an average of 80 pips so what I want to do is to find out what’s the high over here let’s say the higher values X I add on 80 pips it’s called 80 pips P I and let’s say the value a couple it is y so my stop loss would be somewhere over here right let’s call it Y right so this is my stop loss basically 80 pips right from this highs to this level that is my stop loss okay so that is where I set my stop loss now the other question is where do I exit the tree exit my winning tree well if you recall I mentioned that when it comes to exiting your winning trades you want to exit before the opposing pressure comes in and where would all posing pressure come in if you ask me I would say this swing low is a level that you want to be aware of where you know potential buying pressure could come in this is like a swing low any area of support so in terms of taking profit right you want to be looking at this level right to take pick your profit right so just kept doing this one swing down lower over here okay this is just this one swing okay so this is an example on pound dollar of the main formula moving on let’s look at another one or Zn okay so again this is very similar to the two the pound dollar one you look at this market again what is the market structure let’s look at the M let’s call it m a e here okay market structure is down so you want to be selling a real value is that resistance right price or has a real resistance so it’s resistance entry trigger you have someone of a bear golfing pattern let’s call it a be bearish engulfing pattern drive is ham I just put hate shooting so just put s whatever whatever suits you and exits right again right the same technique I share with you right I usually set it 180 are above this highs and I like to exit my trade right before opposing pressure comes in so if you ask me right this level over here this swing low is where a potential buying pressure would come in and a mistake right and many traders do right is that they’d like to send me a TP level the attic profit level below or smack at this level over here right II attorney you know squeeze every damn peep out of the markets remember again right we are trading from an area of value the market moves from one area of value to the mix when you’re dealing with an area there’s a possibility that the market may not retest this level you might just come down close to here and then you reverse higher and if you try to squeeze in all the additional to 3 pips right you might see your winning trade become a losing trade so don’t be too greedy right give the market some buffering on the market have have a little bit of small change right why not right so usually I set my mind my targets right a buffer above the highs over here okay so I don’t really go with ATR for this one I just use a rough estimation usually you know where the price test at the level many times I just said it shot a small distance above it right if you want to can use like you know 0.

2 0.3 ATR to help you kind of line you know quantify the tick profit level but for me I just usually just set it a distance before the obvious market structure level to take my profit okay so in this case you’ll be somewhere here okay so there you have it right this is your exits as well the main formula okay so in this case you know what this is no it’s not important to see the result of the trade right because again I want you to go in verify this formula on your own don’t don’t just trust what Rana say yes yes I like to always say right never trust anything always verify everything that’s the way to sucks it in this business where you can just take my word for it and see oh this works and you do it on your own because if you do not do the work to verify to validate a trading concept of strategy when the drawdown comes right you won’t have the conviction to continue shredding it so this is why you have to do your homework you have to do your own verification your own validation no one’s gonna help you okay so do the work don’t be don’t don’t expect to be spoon-fed that lets new traders lose in trading because they want to be spoon-fed and I’d want that to happen to you so please please do the work moving on right let me share with you another example right the SNP I think is quite a good one to share okay so this time let me just carry off the ATR since you didn’t know how it works so the SNP right you can see that it works on different time frame let me share with you the forward time frame okay over here okay so you look at this right again same thing in this case what is the trend on this market so this one is it gets a little bit tricky because if you look at this just based on this chart you might think that okay the trend is down okay but this is where you know your concept of multiple time frames or you know or rather you know zooming up and look at a big picture it helps because if you look at this right this actually somewhat in a uptrend in the higher time frame and you look at this right now it’s morphe a range if you ask me so to me right I am still comfortable right looking to buy near this this lows over here because if you see later a higher time frame the daily time frame the market is actually still in an uptrend so higher time frame in an uptrend market is at this area of value okay in this area of support then you have this uh this false break over here of a hammer okay and again right this is a main formula monkey structure area value entry trigger and your exits again stop-loss you really know what to do right let’s talk about where is a level that you are consider exiting your trade so couple of levels here that I’m seeing one is this one over here previous uh swing load that could become resistance and the second one is this one here this area of resistance so again don’t be don’t you know trying to nitpick every single paper or thick in the market right I would say you can have two targets here one possibly at this level and maybe one just before this level over here right so you know give the market some some tips some some some a little bit of something so this is an example another one here okay so this may or may not be a winning or losing trade but you can see again right let’s talk about market structure M ay yi yi kay market structure is up area value at this area of support okay every of support right over here area of support okay so it is called s entry trigger you have drugs not a hammer is not a bullish engulfing pattern among exactly sure what is the exact candlestick technical definition but you can see that there is buying pressure coming in right there is a price rejection rejection of lower prices and this this area over here okay so that is an entry trigger as well okay let’s call it other we call this let’s call this a question mark yeah what are things I don’t know what’s the technical term you don’t call it I don’t know let’s call it price rejection right since yeah we’ll just be trading price rejection in the market P PR and your exits right again stops you’re probably familiar with and in terms of exits I would say this over here again right it’s a possible level you want to consider exiting your trade and the second target could possibly be just below this area of resistance somewhere here okay in this case you can see that the market pretty much just hit this this first target in any collapse lore so depending how you manage your trades right so trading is not just entries and entries right depending how you manage your trade this could be a winning or losing trade so let’s have a look at a couple of more examples before we move on another one right is crude oil okay so crude oil okay let’s go to the daily timeframe you see that over here and here okay so again what is the market structure at this at this point in time right market structure M a e he market structure if you ask me it seems to be in a range at this point in time but so let’s call it our area value prices at this area of support entry trigger it seems like a bullish engulfing pattern I call it B exits all right so again stop-loss or I just won ATR below this low in terms of exits right where I foresee opposing pressure could come in is below this this low with previous our swing low could become resistance and possibly a second target is somewhere here okay so again right set your targets before these levels just before it in this case market consider it floated around the entry mess with your psychology but if you have a plan right a plan in place you know where to enter where to exit your trades right you will hold on to the trade and eventually no get to the target that you have determined okay one last example okay so I think so far I share with these also winning trades but that’s not reality so here’s a trade for you two to look so this one racer is a is a very okay so again this one right if you look at this at this point in time market might seem like to be in a range here but everybody’s Torah it’s in a range actually is between this uh this highs and this lows over here so market structure M let’s call it m is in range area value at this area of support right is the area of support over here after on entry trigger you have a nice strong hammered at reject at lower prices so it go along and exits right if you ask me this would be a first possible target that you want to look at right where previous you know swing low could become resistance in this case is a losing trade as a market just you know collapse lower and you probably got stopped out okay so so I hope this few examples I give you a good insight into the main formula so now let me share with you a few of my secret sauces right before we conclude today’s video number one power move into an area of value so whenever you create this type of non reversal this is in essence right trading price rejection of an area value reversal or okay you want to have a power move into a level so if you look at my earlier examples that I share I most of the traits right they all look something like this price let’s say you undo by it comes straight strong into a level very strong momentum large body candles right into a level then then you look to buy at this a a real value right what you don’t want is to see the market come down into a level in a very choppy stair-stepping manner let me let me just illustrate this to you so what you don’t want right is if the market does this let’s say again you’re trying to buy and the market comes down in this manner lower highs and lower lows now this is the type of price action I don’t want to trick why is that because if you recall our exits right we typically exit before opposing pressure comes in if you barn let’s say at this area of value where will opposing pressure coming well there’s a lot of places where opposing pressure could come in right goes and this swing high this swing high the swing high in this swing high or even the swing huh you can see that there’s a lot of areas or levels on the chat where opposing pressure could come in and then reduces your profit potential so this is why I don’t like to create when the market comes into a level into an area in a very choppy stair-stepping manner like no like lower highs into support or higher lows into resistance I don’t want to treat those reversals I don’t even for a strong power move so in case you don’t know what’s a strong power move right just a quick recap but get this right strong power move into a level strong power move right and let’s see we talk about the crude oil one as well getting right strong power move into a level usually the power move the candles right they are just one colored candles and a range of the candles the body they are pretty much so that’s what I mean by a strong power move power okay another one it’s a false breakout followed by strong price rejection so what I like us all to see is that the price breaks out of a key market structure and then get reject that strongly so let’s say let’s something like this okay so let’s see price breaks out of resistance and it gets rejected strongly and close this back within the range so I like to see a false break up because when price breaks in this case breaks out of resistance right above this highs above this highs traders right momentum traders who look to buy the breakout Saudi along and when the price makes a sudden 180 degree reversal now this group of momentum traders this group of break up traders they are now trapped because they buy a breaker and a market does a sudden reversal yeah oh crap you know in the rate us again why does this always happen to me why well it’s because they did it by breakout after the price has made a pole Power Move okay so I like this right when price makes a false breakup followed by a strong price rejection because breakout traders are trapped and a surprise you know let’s say reverse download it will hit get stop-loss right which would fuel for the selling pressure in my favor so I also like to see a false breakout followed by strong price rejection and in fact I think the examples that I’ve shared with you earlier idea are all mostly false breakout of a key level as well and finally right the last tip I have for you is limit order sometimes right where the price rejection is it’s so strong or you miss the move all together right and if you enter the trade is too late the risk to reward as n’t make sense so what now so what you can do is use a limit order to see if we can get filled in a better price so let me give you an example of the limit order technique so let’s say right for number let’s say over here you notice that there is a price rejection and support okay and the mocking that’s really not really near this highs over here if you were to buy right now you’ll be buying you’re near the heist let’s say your stop-loss is 180 our pillow this loss let’s say somewhere here okay you see that your stop-loss is pretty done wine if you buy right now right it’s only gonna be a shot long before you find encounter you know selling pressure at this level so what can you do so one technique to share with you is to use a limit order to see if you can get fill in a better price and thereby improving your risk to reward on the trick so let me just share with you right let’s say instead of you know buying at this house you you tell yourself you know what I’m just gonna place a limit order a buy limit order and see if I can get filled at a better price if I can feel great right I know my wrists we want on the freight will be improved if I don’t get a feel it’s okay I’ll move on to something else so in this case you can you know set your limit order let’s say a below this loss of this candle somewhere here okay and from here you can see that now your if your entries here your stop loss is to at this level your risk right let’s call your race right it’s now in terms of you know dollar terms your risk is and reduce okay and your risk to reward is now you know improved and one thing to share with you is that whenever you set your limit order you want to place it a market structure where the price would have difficulty going true so this is where you can use multiple time frame to assist you with it so let me just go down to let’s see for what time frame ending and share with you what I mean so in this case okay so this is the portion here where we we saw earlier on higher time frame you just share with you right so this somewhere about here I believe somewhere about here is where you saw that then buy any other high so when you want to user a limit order to get it at a better price if you notice that let’s say there is this previous market structure over here previous resistance that we can support or if let’s say when you look at a chat right there is another of this market structure here over here okay what you to do is to place a buy limit order at this market structure don’t try to place a buy limit order like let’s say over here because the price has to break down this market structure in this market structure before you get fill and by the time you break so many market structure right probably it’s gonna be a loss okay so if you think about this or if the trade should work right this market structure that you see over here on a lower timeframe you should whole so what you want to do is to place let’s say I buy him in order at this level and if you can do get feel right you would see that you know you’re actually buying and an area where buyers could potentially come in to support this higher prices so this is a good area right to consider placing your buy limit order I would say this is the one that I will most likely place at this unlikely I’ll place it over here because the price would have to you know break this level over here and if the price doesn’t break this level if this level holds right and let’s say reverse from here higher right I would have missed the trade because I was being too conservative place a buy limit order over here so usually what you want to do is go down to a lower timeframe and observe the market structure where is a logical market structure where I can place my limit order to get filled on the tree and the market structure would help you know support that so-called bias of your trade okay so this is how the limit order technique works so those three are my secret sources and let’s do a quick recap before we conclude today’s video number one never trade candlestick patterns in isolation right you have seen more if you do it you’ll find that you know you lose pretty often number two right the the meat of today’s video is simply the may formula and even thing about this right the main formula is simply answering this question what should you do market structure tells you what you should do right whether the market is in an uptrend or downtrend if market is in a plane you want to buy market is in a downtrend you wanna sell so the M of the may formula tells you what you should do the a of the may formula is the area of value it tells you where to buy or where to sell right where to buy and where to sell you’ll be my in support you’re gonna be selling a resistance moving average trendline whatever your area of failure the area of value tells you where you should be trading and the ear I the entry trigger tells you when when to enter the trade right the candlestick patterns right is the entry trigger that tells you when to enter the tray and finally right the exit the so tells you when to exit the trade if you know if it goes or in your favor or against you okay so this is the main formula hopefully you know this is something I want you to go out there test it verify it before you treat with your own real money please please do that and finally we talked about the secret sauces where I look for a strong power move into market structure because it improves my profit potential number two I like to see a false break up followed by strong price rejection because I can then trap right the break-up traders who bought the break-up okay and finally let me order right if the prices move too much and your desire level price you can have a limit order and see if you get field to improve your risk to reward on the tree okay so this is the candlestick patterns training video and if you’ve enjoyed today’s lesson then this is something that you enjoy even more I have this trading guide for you called the price action trading ultimate guide to price action trading just go down to my website trading with free no calm click this orange button and I’ll send it to your email address for free right you’ll learn how to better time your entries and exits we cover no more price action trading concepts and much more and it’s free so do it right now go to my website sign up for it and I’ll send it to you to your email and we that’s it I have come towards the end of this video if you’ve enjoyed it hit that thumbs up button subscribe to my youtube channel the link is all below and I will talk to you soon you

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