E01: Different Types Of Candlesticks (The Ultimate Guide To Candlestick Patterns)

welcome to the ultimate guide to candlestick patterns episode one this is a comprehensive course and it's gonna cover every detail about candlesticks and candlestick patterns and how they are used for trading in this first episode i'll start with the basics and different kinds of candles that you see on the charts and i'll explain how they are interpreted and what they tell us about the market without wasting any more time let's get started all right here we go first let's see how a candlestick is constructed each candle is made by four pieces of information opening price closing price highest price and lowest price in a time period for example if we are considering candlesticks in one day time frame the price that the financial asset opened in a day the price that is closed at the end of that day and highest and lowest prices during that day or if for example we're considering getting one hour time frame the opening price in an hour the closing price at the end of the hour and highest and lowest prices during that hour so in each candle as you can see we have four information here it shows the opening price here the closing price by considering the closing price is higher than the open price here the highest price and here the lowest price the area you see here the thick part of the candle is called body or some calls it real body and it's actually the range between opening price and closing price in that session when the closing price is higher than the opening price in the session the body is usually represented by green color and when the closing price is lower than the opening price it's usually represented by red color the thin parts of the candle that you see here above and below the body are called shadows or some calls it wicks the one that is above the body is called upper shadow and the one that is below the body is called lower shadow the top of the upper shadow shows the highest price that is reached in the session and the bottom of the lower shadow shows the lowest price of the session the body is usually the most important part of a candlestick and the shadows are usually considered as price fluctuations especially in daily time frame open and close are very important emotionally because the opening price of a day can give us insight into the direction of that day all the news and fundamental factors overnight are gathered to be reflected in one point the opening hours of the market and we may see morning attack which is large buying or selling orders that is placed by larger traders to move the market and the closing price is also important and we can see large emotional effects it's also very important among technical analysts and algorithm trading because most of the confirmations are based on closing prices and also many of the tools and indicators use closing prices and this importance is not only on daily time frame and the opening and closing prices in every time frame and every financial market is considered important because by knowing the open and close and also low and high of each time period you can have a view on the status of the bulls and bears and realize which of them had the upper hand in the session trading is very similar to fighting a battle between bulls and bears bulls push the price up and bears push the price down it's actually a fight between buyers and sellers or in another wars supply and demand when more and more people are interested to buy this causes the demand to exceed the supply and the price goes up and the bulls become the winner of the fight and when more and more people are interested to sell this causes the supply to exceed the demand and the price goes down and bayers take the control of the market always remember that the price at any given time is the result of the battle between buyers and sellers so when you see a green candle like this where the closing price is higher than the open price it means that in that session the bulls had the upper hand took the control of the price and pushed the price up higher than where it opened in other words it means that because of a reason more and more traders were interested to buy in that session and the demand was greater than the supply in that time period which caused the price to go up and when you see a red candle like this when the closing price is lower than the opening price it indicates that in that session the buyers had the upper hand and pushed the price lower than the opening price in other words it means that because of a reason more and more traders were interested to sell in that session and the supply was greater than the demand in that time period which caused the price to go down so now you understand why the open and close are important because by knowing the opening price you have an early view of the battlefield and by knowing the closing price you realize who had the upper hand in that session so a long green candle like the one you see here that has actually long body and small shadows shows a bullish period and a long red candle shows a bearish period the longer the body and the smaller the shadows the stronger the candle for example between these two candles which one of them is shorter the longer one is more bullish because in that session the closing price is much higher than the opening price in compared to the shorter candle and this shows that balls were more active and were more aggressive in that session and drove the price to higher levels the same is correct with red candles the longer red candle is more bearish and it shows that sellers were more aggressively pushed the price down in that time period and compared to shorter red candle and if there is no shadows and we have only body it's called marubozu marubozu is a japanese ward meaning shaved head or bald head in green moru bozu the opening prize and low price are equal and the close and high are also equal the candle shows that the buyers were very very aggressive in a session and they had the full control from the open to close the scandal shows high buying pressure higher than the long green candle we just discussed and in red maru bozu high is equal to the opening price and also close and low or equal this candle shows that sellers were very very aggressive in that time period and had the full control of the price from open to close and it shows high selling pressure higher than the long red candle we have other forms of marubozu candles like closing marubozu and opening moro bazu bullish closing marubozu is like long green candle but without upper shadow this candle shows that for short time sellers took the control and drove the price a little lower than the open but buyers didn't allow the price to go lower and aggressively push the price to higher levels considerably with the full control to close the candle and bearish closing mode bozu is like long red candle but without the lower shadow the scandal also shows that although buyers drove the price a little higher than the open but finally that was the sellers who took the control and aggressively pushed the price down significantly to lower levels with a full control to close the candle and in bullish opening moru bozu we don't have lower shadow which means from the opening buyers had the control but at the end sellers had a little control and the price is closed a little lower than high this candle may be just a little weaker than green model bazoo and we can consider its buying pressure like a long green candle and in the bearish one we don't have upper shadow but a small lower shadow that's similar to the bullish one we can say this candle is just a little weaker than red maru bozu and its selling pressure can be considered as long red candle now you may ask what if the body is small or the shadows are long or one shadow is small and the other long let's see what other kinds of candlesticks we have and what they tell us when we have small body and the shadows are approximately equal the candlestick is called spinning top we may have different length of the shadows like small shadows or long shadows but the size of the shadows doesn't matter in identifying the spanning top and that's the body the small body that makes the spinning top also the color of the body doesn't matter because we have small movement from open to close which is not considerable spending top shows a tug of war and a kind of indecision and a standoff between forces of buyers and sellers in the case of long shadows it shows that both buyers and sellers were active during the session and could drive the price up or down considerably but none of them could take the control of the price and the result was a standoff spinning tops are neutral and they don't mean anything but indecision the smaller the body and the shorter the shadows the greater is the amount of indecision interpretation of being bullish or bearish depends on where it forms on the charts if it forms following an advance or near a resistance level in other words if it forms in the top it's bearish and it shows that warriors are weakening and there is a possibility for turning of the prize and if it appears following a decline or near support levels in in other words if it forms in the bottom it's bullish and it shows that sellers are losing strength and there is a possibility of changing in the direction of the price spanning tops become more important when they are parts of certain formations with other candlesticks like stars patterns or harami patterns which we will discuss them in next episodes another forms of candlesticks are when we have small body like spinning tops but one of the shadows is long and the other shadow is small or non-existent in the ideal situation and based on where they form on the chores they have different names and different interpretation all right first let's consider this candle where we have long upper shadow and a small lower shadow and as i said in the ideal situation we don't have this small lower shadow and this makes the candle even more significant because the body is small which means that we had little movement between open and close so the color of this candle doesn't matter the long upper shadow shows that at first wires had to control and drove the price to higher levels significantly but then sellers stepped in took the control of the price and pushed the price down near the level it was opened so this means that when the price reached to this high level it was rejected buyers were not interested to buy any more at this price or higher than this price because of a fundamental reason or emotionally or just being expensive at this high level the numbers of sellers increased considerably and the price went back near the open level this candle is naturally bearish and it shows selling pressure but interpretation of being bullish or bearish depends on where it forms when the scandal forms following an advance or near resistance level in another wars when it forms in the top it's called shooting star and in this situation it's bearish showing selling pressure and gives the possibility of changing in the direction of the price and when the scandal forms following a decline or near support level in another wars when it forms in the bottom it's called inverted hammer and in the situation it's bullish and it shows buying pressure because being in the bottom we see that buyers were aggressive and were strong enough to drove the price to high levels significantly so in the bottom somewhere in support level or following a decline we have increased buying pressure which gives the possibility of changing in the direction of the prize and for these candles where the lower shadow is long and the upper shadow is small or non-existent in the ideal situation and the interpretation is the same but in the opposite direction the long lower shadow shows that at first sellers had to control and push the price down significantly but at the end that was the buyers who had the upper hand and drove the price near the opening level the scandal is naturally bullish and it shows buying pressure but in practice being bullish or bearish depends on where it forms when it forms in the bottom following a decline or near support level it's called hammer and it shows buying pressure and gives the possibility of changing in the direction of the prize and when it forms in the top following an advance or near resistance level it's called hanging man and it's bearish showing selling pressure because the lower shadow shows that sellers were aggressive and strong enough that pushed the price down significantly while the price was in the top near resistance level or in an advance and this gives the possibility that the price may change its direction and other forms of candles that are very significant and very very important whether considering individually or in combination with other candles as a pattern are doji's doji and its variations are the most important candles among others and also they are part of some important patterns that we will discuss them in next episodes a doji is similar to spinning tops with short shadows but in this candle the opening and closing prices are approximately equal or totally equal in the audio situation and it looks like a plus sign similar to spanning tops a doji also shows a decision and a standoff between forces of buyers and sellers and in compared to spending tops the degree of indecision for dojis is higher because we don't have body we have small shadows and this tells us that buyers and sellers were not active in the session a doji candlestick is neutral and they don't mean anything but indecision and the interpretation depends on where it forms or what's the previous candle for example a doji that forms in the top following an advance or near resistance levels shows that wires are weakening and a change in the direction of the price may happen or when it forms in the bottom following a decline or near support level it shows that sellers are weakening as i said previous candles are also important in interpretation of a doji for example a doji after a long candlestick is more significant than being after a short candlestick dojis are mostly considered in combination with other candlesticks in the form of a pattern which i'll explain them in next episodes we have different kinds of dojis and not all of them show in decision and some of them are naturally bullish or bearish there are seven kinds of dojis the first one is the one that we just discussed and it's called common doji plus sign doji doji is star we can just call it doji now let me explain the other dojis in detail the second coin is long like doji it's similar to plus sign doji but with long shadows it's actually like the spinning top with long shadows but here we don't have body and this long leg doji in compared to plus sign doji wires and sellers were more active and each of them had to control for some time and could push the price up and down significantly but finally there was a standoff and the price closed approximately in the opening level and this shows uh in decision among buyers and sellers longleg doji is neutral like plus sign doji and it means nothing but indecision and the interpretation is exactly the same depending on where it forms or previous candles but plus sign doji has greater amount of indecision and is more significant than the long leg doji because in longleg doji buyers and sellers were more active in the session and compared to spending tops long leg doji is more significant because in spending tops we have body but here in longleg doji we don't have any activity from buyers and sellers between open and close and this shows greater amount of indecision cross doji and inverted cross doji cross doji is similar to hammer and hanging man and inverted cross doji is similar to inverted hammer and shooting star the only difference is that here in cross doji and inverted cross doji the open and close are approximately equal and we don't have any activity between open and close which shows greater amount of indecision so cross doji and inverted cross doji are more significant in giving any possibilities for changing in the direction of the prize and they can be considered the ideal version of those candles the interpretation of cross 2j and inverted cross doji are exactly similar to hammer and shooting star so here i don't repeat again the interpretation and how the buyers and sellers battled behind the scene just know that cross doji is naturally bullish but being bullish or bearish depends on where it forms forming in the bottom following a decline or near support level it shows buying pressure and gives the possibility of changing in the direction of the price and forming following an advance or near resistance level it shows selling pressure and gives the possibility that the price may change direction the reason why in the situation it becomes bearish as i explained for hanging man if you remember because the price is in top for example near a resistance level but sellers were aggressive and strong enough to push the price down significantly in fact it shows increased selling pressure when the price is actually on top so gives the possibility of changing in the direction of the price and inverted cross doji is naturally bearish but the interpretation of being bullish or bearish depends on where it forms if it forms following an advance or near resistance levels it's bearish showing selling pressure and gives the possibility that the price may turn and when it forms following declines or near support levels it's bullish and it shows buying pressure as i explained the reason of being bullish in the situation is that we have signs of increased buying pressure in the bottom which gives the possibility of changing in the direction of the prize dragonfly doji and gravestone doji dragonfly doji is similar to cross doji but here we don't have upper shadow actually the open close and high are equal and grave sundoji is similar to inverted cross doji but here we don't have lower shadow and the open close and low or equal the interpretation nature and signals of dragonfly doji and gravestone doji are exactly similar to cross doji and inverted cross doji so i don't repeat it here again just the only difference is that dragonfly doji and gravestone doji are more significant and they are actually considered the ideal version of the cross doji and inverted cross doji and the last one is called for price doji and this doji open close high and low are equal and we only have one horizontal line and it shows the ultimate indecision greater amount of indecision in compared to plus sign doji but for price doji is not very common and it rarely forms on the charts all right that said in this first episode we talked about the basics of the candlesticks the way they are made different kinds of candles their interpretations and how they help us to analyze the behavior and actions of buyers and sellers to realize their status and possible next movements in next episode we'll talk about candlestick patterns and you will learn some amazing patterns that will help you a lot in your trading thank you for watching my video and i hope it has been helpful for you if you found any value in this video please like it please subscribe to my channel if you haven't already and hit the bell so you get the notifications of my new videos see you guys in next episode and good luck with your trading you

Channel: Soheil PKO

Views: 165,638

Rating: 4.9414763 out of 5

Keywords: the ultimate guide to candlestick patterns, different types of candlesticks, candlestick patterns, candlestick, candlestick patterns and how to read them, candlestick trend analysis, candlestick patterns for beginners, candlestick trading, candlestick pattern analysis, candlestick analysis, candlestick pattern analysis for beginners, candlestick patterns for intraday trading, candlestick chart analysis, candlestick chart patterns, candlestick cheat sheet, candlestick meaning, forex

Id: tcq0Dqlne0Q

Length: 19min 55sec (1195 seconds)

Published: Sun Dec 13 2020

Reddit Comments

[u/CloudSlydr]

very clear and meaningful descriptions! this is great content keep it coming ;)

[u/SmokyTyrz]

Great work! I let NinjaTrader tell me and my strategy which candle is happening right now, otherwise it is too much to try to keep track of across many charts.

[u/StorageB107]

These are good videos. Presenting good information with no fluff. Subscribed and will start watching the rest of your videos.

[u/kgk007]

Thanks. Is anyone aware of statistical edge of one pattern over another? I remember reading in Thomas Bulkowski's book that 3 bar bullish/bearish breakout had a significant edge over others. I haven't backtested this one way or another.

[u/ThatSenorita]

thank you for this awesome video, subbed

[u/MuchoPremium]

This is the kind of content this page needs

[u/TheTradingCommunity]

What a great video, amazing content! On what timeframes would you use these candlesticks as trade confirmations?

[u/Fatal_Anal15]

Noice👌🏽

[u/Roversid96]

Is this a good way to trade?