Home Trading Strategies Do You Make These Candlestick Patterns Mistakes?

Do You Make These Candlestick Patterns Mistakes?

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Do You Make These Candlestick Patterns Mistakes?

hey hey what’s up my friend so in today’s training I will share with you some of the common mistakes that I see traders make when they treat candlestick patterns and how you can avoid it number one traders already trick candlestick patterns in isolation so what do I mean by this so let me give you an example if you look at this chart over here I often write there will be a number of traders who look at it and they say stuff like oh Rainer look Rainer there’s a cloud cover over here oh and from what I read in the textbook that cloud cover means that the price should go lower so let me sell and when they sell the market goes up higher and it gets knocked out and then they will look at this channel Oh Rainer there is a bearish engulfing pattern look up this pattern has cover the earlier Kindle this is bearish Rainer and then propagate stopped up and then another bearish engulfing pattern you get stopped out another bearish candle they shot and they get stopped out and and they wonder why and the reason is simple is that you don’t want to be trading candlestick patterns in isolation because candlestick patterns they are not meant to to tell you whether you should be buying or selling right market structure is the one that tells you that so the first kind of got like on a share with you is their market structure Trump’s any candlestick patterns that you’ll come across this means is that if the market is in an uptrend and you spot a shooting star it doesn’t mean that trend is going to reverse what it tells you is that more often than not the uptrend is gonna persist and it’s gonna continue so whatever opposing candlestick patterns that appear along the way more often than not those patterns will fill so market structure it Trump’s any candlestick patterns and if you think about this trend takes anywhere from 100 200 candles to fall a candlestick pattern is just one individual candle what are the odds right off 200 candles winning the individual candle but also pretty high right or rather let me phrase it another way around what are odds alright of the one individual candlestick pattern winning the war against the preceding two hundred candles that define the train so think about that so now at this point you might be thinking okay right now so so how do I treat with Candlestick patterns right so what is candlestick patterns for if you know I can use it to do to treat the markets right so I’ll introduce to you something called the me formula what is the main formula so the main formula stands for M is market structure you don’t ask yourselves to market in an uptrend downtrend range or what a stands for area of failure right where is the area of value on your chart is it at support resistance swing high swing lows pivot points moving average trendline channels etc how do you want to define your area of value E the first e entry trigger this is where candlestick patterns come into play right entry trigger could be something like a bearish engulfing pattern it could be something like a hammer it can be something like a shooting star and a second e stands for exit where will you exit your trick would you be looking to have a fixed target profit will you be looking to trail your stop-loss okay so this is what the main formula is all about and let me give you a few examples right so you know what I’m talking about and how the main formula works in action so if you look at this right this is the the chart of the pound dollar okay and also surve right let’s apply the main formula shall we so what is the market structure right now if you ask me the market is in a downtrend right you can see a series of lower highs and lower lows down train a it’s the market and area of values so from what I’m seeing right the price is that this area of value right where previous support now could become resistance at this area of value so area value let’s call it our resistance e entry trigger is there a valid entry figure to cochon right from what I seeing right there is a bearish engulfing pattern over here let’s call it B exists is there a valid place for you to exit your trade again this is a potential swing low minor area of support where you can look to exit your trip so let’s call it a s right swing low okay so you can see this is how the main formula works right so instead of trading Candlestick patterns in isolation you apply this formula to make sure that all the other factors are lined up now make sure you make sure that you are using the candlestick patterns in the right context of the market if you cannot answer you can’t apply it to a specific chart that you’re trading then chances are you don’t want to be trading that particular candlestick pattern right because everything has to fall into place where you want to be trading within the right monkey structure from an area of value if and there is nowhere to exit your tree as well so this is what I mean by the main formula let me share with you another example so this one over here you can see again right this is kind of similar to the the pound dollar one again what is the market structure again to me it’s in a downtrend a real value from what I’m saying this is the previous support right there now against resistance and now this resistance is still holding up let’s call it our entry trigger you have something that looks kind of like a strong price rejection I think I would say it’s a bearish engulfing pattern let’s call it be exiting your trade right if you move in your favor I would say this over here this swing lower is a possible area to exit your winning trade okay so you can call it again a swing low s okay this is how the main formula works let me give you one more example right to car appeal a straight this main formula concept okay in our time frame you can see that over here gained same thing I assume on this chart what is this our market structure at this point I can just pull out ma ee so whenever you know you want to put on a trade just pull out this formula ma e e and as I said what is this market structure from me this looks like a potential accumulation stage or even a range so let’s call it potential accumulation stage right a area of value right we are at this area of support then you can see over here so let’s call it s entry trigger we have a hammer over here oh let’s call it h as for exists right so exits there are two components right exit when you are right and exit when you’re wrong so exit when you’re wrong pretty much mean where will you put your stop loss so usually I said my stop loss 180 are below this loss so somewhere here and s for exit when you are right right if you look at this right this over here is a potential resistance area so let’s call it all right this is where you could exit if the market moves in your favor okay so again this is how the me formula works and just to share with you write this formula it’s it’s not the holy crao you will have winners you will have losses but what’s important is that it puts right your candlestick patterns right into the context of the market and that right should right improve your trading results and and yep okay so with that said let’s uh let’s move on shall we mistake number two right you do want to memorize candlestick patterns right so this is something that I myself am guilty of right when I first started trading right I came across candlestick patterns and I was fascinated right so many patterns right Morningstar evening star ami doji hanging man shooting star bearish engulfing bed a bullish engulfing I’m a miss so I tried to remember every single candlestick patterns out there and I tried to put the meaning right of each candlestick patterns right dude whatever name it has right like for example three white soldiers right three black crows stuff like that and after a while I got burned out right because the market is always changing right the patterns may not look identical to what I just memorize in and I had to you know ask myself right which pattern does this fall into all right which is the right answer so you can see that when I try to memorize candlestick patterns right and the market changed a little bit I got lost I got frustrated I didn’t know what to do so here’s the thing right you don’t want to memorize candlestick patterns instead what you want to do is to understand candlestick patterns right the key word here is understand now you might be wondering how well I’m gonna share with you how to do it right by using these two questions and oh by the way if you’re enjoying this video so far the thumbs up button and subscribe to my youtube channel though the links are below right hit subscribe this way whenever I publish a new training you will never miss it so now this two questions right the first question where did a price close relative to arranged this will let you know right who’s in control is it a bias is it a sellers or nobody’s in control the second question right what’s the size of the candle relative to the earlier ones this tells you right if there is any strength behind the move is there any conviction behind the move is the move for real or is it just you know a weak move okay so let me give you an example first question whether the price close relative to the range so you can see over here the first one is that the price it close near the highest of the range this tells you that the buyers are in control that’s that’s how they are able to be closing right near the highs of the range and now another mistake that traders would make is that they start to find shortcuts o’rena doesn’t mean that you know if the candle is Green is bullish candle Israelis bearish so simple well not quite because remember I said that where did the price close relative to the range so here you can have a bullish close a higher close but this this right doesn’t tell you that the biosign control in fact this to me right shows shows mere a strong price rejection it shows me that the sellers are in the background right pushing the price from this high all do we know near the lows of the range this to me sell us are in control so again don’t just see green means bullish rate means marriage doesn’t really quite work like that you have to look at whether the price close relative to the range second question right what’s the size of the candle relative to the earlier ones and the purpose of this question is you want to know right it’s the move is it for real is that you strength behind the move or is it is it just a weak move that you know nothing much is going to happen so let me give you an example so if you look at this over here so over here you see a number of a bearish engulfing pattern there’s one over here okay and there is one over here and this is I would say that cloud cover as well but notice that all these candles right yes the sellers they are in control but is there any conviction behind a move not quite right because if you look at this this candle right prior to it this range of this candle is pretty much similar to the range of the earlier candles there really isn’t much of a difference right so in terms of the power in terms of the strength in terms of the conviction it really isn’t there so likewise for this this particular candle okay again the range of this candle is relatively small compared to the earlier one so again there’s not much conviction behind the move so what does conviction look like what a strength behind the move looks like so let me give you an example look at this candle over here this is another bearish engulfing pattern but notice the range of this candle compared to the earlier ones do you see the difference do you see the difference the range of this candle it’s so much larger compared to the earlier candles this tells you that there is conviction behind the move this tells you that there is strength behind the move right because the range of the candle is just so much larger relative to the earlier ones this one is another example notice the range of this candle this candle is so much larger than the earlier candles as well same folders right the range of this candle is much larger than the earlier candles as well so this gives you a good idea that there is conviction behind the move okay and if you understand this this concept that I just share with you if you understand this this two question then I’ll just share with you you don’t ever have to memorize and you candlestick pattern again just know these two questions and you can understand any pattern that comes your way number one way the price close relative to the range this tells you who’s in control and number two what’s the size of the candle relative to the earlier ones this tells you whether there is any strength or conviction behind the move moving on right mistake number three traders right they tend to look at candlestick patterns individually right they don’t look at it as a group right so when you just look at one candle stick pattern it only tells you a small part of the story whether you know the bias close higher or the sellers are in control momentarily but when you look at a group of candles right it tells you the juicy part of the story it tells you stuff that individual candlestick patterns right are not able to so let me give you an example show shall we so if you look at this right this is the child of pounce freeze-frame so notice over here this this group of candles it tells me that the buyers are in control right the range of the candles they are expanding they broke out of this area of resistance and buyers are in control then what happened is that volatility sring right we went into this range over here and volatility in the markets shrank so you can see that if you were to just look at this individual candlestick right you make me look at this oh this is a hanging man oh this is a long-legged doji right indecision oh this is a higher close oh this is like a spinning top oh this is a shooting star oh this is a bullish engulfing pattern oh this is something like a who’s shooting a spinning top oh this is a small doji right if you look at this individually you will confuse the heck out of yourself and you don’t even know what to do right but if you just take a step back look at it as a group of candles right the the story right will be much more clearer so as I was saying earlier if you look at it as a group of candles right you see volatility expansion by a sign control now you see volatility contraction okay the talk of voids going on between buyers and sellers by your bias I mean your your your bias be IAS or I should be towards the upside because after all you’ll notice that this market the market structure is in an uptrend so you want to be looking for buy opportunity at the same time right you know that in this volatility contraction right there will be traders who are looking to short or who are short and traders who are long and where will they put your stop-loss chances traitors one shot would have your stop-loss above this height and traitors who are long will have their stop-loss below this loss but since your bias is towards the upside you could potentially look to trick the breakout to break out of this Hinds in anticipation of higher prices right because you started earlier this group of candles it shows that the buyers are in control if strong buying pressure that could possibly happen again right if the price would the freedom of this heist triggering the cluster of stop-loss right in attracting momentum and breakout traders to take the the long trade as well so that could happen so can you see how this this story it’s much more fuller is much more juicier compared to hundred individual candlestick pattern Oh long-legged doji indecision in the market oh this is higher close buyers are in control oh this is shooting star this is bearish I mean come on okay so the key thing here then I wanna share is learn how to look at candlestick patterns not just individually for entry trigger but also as a whole so you can see right what’s the big picture right what’s the story help what is the story that what is the thing that’s about to occur right where will traders enter their trades where will traders get trapped who’s in control right what is the proceeding price section before this volatility contraction pattern etc so let’s do a quick recap shall we number one don’t trick candlestick patterns in isolation right because as I’ve mentioned right the trend the market structure it will destroy any candlestick pattern that you come across and if you want to use candlestick pattern remember the main formula market structure a real value and three trigger n exits number two don’t memorize candlestick patterns you will burn yourself out instead right if you want to understand any candlestick pattern just ask yourself two questions where did the price close relative to range try this tells you who’s in control and what’s the size of the candle relative to the earlier ones this tells you know whether there is any strength or conviction behind the move and finally right don’t just look at candlestick patterns one by one right learn to look at them as a group as well this gives you kind of like x-ray vision right there they will elute most traders and give you a deeper insight to what’s going on in the markets sounds good then here’s what I wanted to do reviewer if you are enjoying this type of container are you under learn more about candlestick patterns all right so what you can do is go down to my website trading with Raina comm and there is this guy over here that will complement what you have just learned it’s called the ultimate guide to price action trading so you will learn stuff like support resistance you’ll learn more knowledge on candlestick patterns you’ll learn how to better turn your entries and exits and simpler trading strategies right that you can use to trade the markets it’s all in this guide over here so just go down to my website click this orange button and I’ll send it to your inbox for free so go do it right now and with that’s it I’ve come to us I’ve come towards the end of this video right if you’ve enjoyed it hit that thumbs up button subscribe to my youtube channel and I will talk to you soon you

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