The Only Candlestick Patterns Trading Video You Will Ever Need... (Beginner To Advanced)

candlesticks and candlestick patterns are quite literally the most important thing for you to understand when trading in any financial market without understanding candlesticks you can't even read price much less make accurate trading decisions about what's likely to happen next trying to trade without understanding candlesticks would be like trying to read a book with a blindfold on but having a clear understanding of candlesticks and candlestick patterns is exactly what you need in order to build the foundation of a profitable and money-making trading career so in this video i'll be showing you every single thing you need to know about candlesticks and candlestick patterns so that you can have that solid foundation and build on it to create a profitable and money making career so if that sounds good go ahead and click that like button for me it helps out with the youtube algorithm go ahead and hit subscribe it's down below the video to the right hand side and the notification bell because we come out with content like this each and every week after the intro and disclaimer i will be giving you guys some time stamps for those of you who are already familiar with the basics of candlesticks but we have a ton to go over today including a candlestick strategy that i have never taught before so let's go ahead and dive in and i'll see you guys after the intro and disclaimer [Music] welcome back and the first thing we're going to do is go over this time stamp so this is all the things we're gonna get through today feel free to jump ahead to wherever you are right now in terms of what you already know the first thing we're going over is what are candlesticks what do they show us and why do we use them in financial markets in section number two we're gonna be talking about how to read candlesticks the psychology of a candlestick and how we can interpret what the market's likely to do next by the difference in the size of the wicks and the bodies of particular candles in section three we're going to be talking about candlestick patterns that work this is going to be the three most powerful candlestick patterns that i have ever found in my own trading and after that we're diving into the really cool stuff in number four i'm gonna be showing you guys how to trade with the trend using candlestick patterns and i'm gonna give you a full strategy that i've never taught before in lesson number five we're going to talk about price action patterns we're going to talk about how to combine a number of different candles in order to point out and predict market reversals using price action patterns in lesson number six we're going to talk about what i call cest how to put everything together that you've learned so far in order to build a full and profitable trading strategy and then lesson number seven is just going to be a recap so with that said let's go ahead and get started with number one what are candlesticks [Music] just so we're clear everything we're about to go over is applicable in all financial markets including crypto stocks and forex but currently we are on a candlestick chart of the dollar yen and we're on a four hour chart of that dollar yen now each of these candlesticks what they actually are that first question we have which is what are candlesticks they are a representation of price movement during a certain period of time with us being on the dollar yen four hour chart that means each of these represents four hours of price movement on you guessed it the dollar against the yen because that's the asset we're looking at so what these candlesticks show us moving on to question number two what candlesticks show us is the open high low and close of that four hour period so each of these candles if i zoom in here represents and shows us during a four hour period where that candle opened the highest point that candle got to the lowest point that candle got to and the close of that four hour period after four hours passed so that's what a candlestick shows us and the way we use candlesticks if i zoom out a bit is to determine the trend of a market is to determine areas of value we can trade in and even to determine entries based on candlestick patterns we're going to discuss a little later in the course they can also help us determine when we should exit trades all things we're going to dive into right now starting with how do we read candlesticks what is the psychology of a candlestick and how we can use the size of the wicks and the bodies to help us determine what's likely to happen next on a particular asset like the dollar yen so with that said let's move on now to how to read candlesticks [Music] here are a couple of single candles and what these candles represent is price movement throughout a certain period of time depending on the time frame that you're on i'm sure you've all heard of time frames right the daily chart the one hour chart the five minute chart depending on what time frame you're on that's the amount of price movement these candles represent so let's consider that we are on a five-minute chart that means that each of these candlesticks would represent five minutes of price movement now before i get ahead of myself candles have two parts candlesticks have a body which you can see here colored in in green and a wick which are the lines above and below the body of the candle a green candle represents a five-minute period since we're on a five-minute chart right a five minute period where price went up or closed above where it opened we're going over that in just a second a red candle has a body as well but the body of this candle is red because it represents a five minute period where price closed below or went lower during that five minutes to make this really simple let me go ahead and explain the open high low and close the open of a candle is where it opened during that five minute period so let's say that the beginning of our candle is at 12 o'clock what this candle would represent is the open of a candle at 12 o'clock the low would be the lowest point price got to during a five-minute period the high would be the highest point price got to during a five-minute period and our close would happen at 12.05 and that would be the ending price during a five minute period so that is a green candle a red candle represents when price went down during that period of time so for a red candle we would have an open at the top of the body this is the only difference between the two candles the open is at the top of the body of a red candle because during a red candle it represents a period where price closed below where it opened or went lower during let's say a five minute chart so the open is there the highest point is the same it's the top of the line or wick of the candle that's the highest point price got to within five minutes the low is the lowest wick on that candle that's the lowest point price got to in five minutes and the close is the closing price after five minutes of data on a five minute chart again we started this at 12 o'clock then the closing price would be at 1205 and this candle shows you all of price between all of the action of price between 12 and 1205 if you're on a five minute chart if we're on any other time frame everything is exactly the same except for the amount of time that passes if you're on a one hour chart then this would be the open at 12 o'clock and the close of this candle would be at one o'clock everything else stays the same the low is the lowest point that candle got to during that hour the highest the highest point that candle got to during that hour so now you should have a good idea of how to read a single candlestick what i want to do next is go down to a chart and actually talk about the psychology behind a candlestick and what the size of the wicks and the bodies can tell us about the potential direction that a particular asset is likely to go next let's head down to a chart and do that i'll see you there okay to start off with we're on a chart of bitcoin as i said this is going to be the same across the board stocks crypto and forex so on this crypto chart just as a quick recap on this green candle right here we are currently on the daily chart of bitcoin how much time passes during this green candle this represents a full 24 hour or daily period of time right the open of this candle would be the bottom of the green body this little bitty wick towards the bottom would be the low the little bitty wick towards the top would be the high if i say little bitty again please punch me in the face and this area at the top of the body is the close of that candle so this represents a day when buyers were in control because we finished above where we opened in a big way and leads me into the psychology of candlesticks so we're gonna talk about three different candlesticks psychology wise we have the momentum candle we have the indecision candle and we have the long wicked candle let's talk about the momentum candle first since we're here on this chart so as for a momentum candle the the candle you see right here does it look like it has a lot of momentum well the way you can tell is how big the body is compared to these small wicks because of that you know that this was a moment of time this was a day that bulls had control nearly the entire day so what i want you to think about it as psychology wise is think about it like a battle between the bulls and the bears with each of these candlesticks bulls by the way are buyers bears or sellers so think about it as a battle between bulls and bears on a day like this that means that at the start of the day bears tried to push down just this much barely any before bulls took complete control pushing the market higher and ending near the top or near the high and that insinuates or lets you know that bulls at least for that day were in control and may end up being in control over the next day or two days or three days let's see what happened in this case as you can see that represented what was coming next in this next bull run here on bitcoin and an important note is that all the candlesticks we're about to discuss mean absolutely nothing if they are not either a swing high or at the end of a pullback if they happen in the middle of nowhere that's not something you really want to pay attention to that was just a quick side note but now let's take a look at a bearish example of a momentum candle here we have a bearish momentum candle and again let's think about this from a psychology side since that's what we're discussing right now think of it like a boxing match at the start of the round and you know the opening bell rings they open up the bull or bulls push up a little before bears finally just take complete control and end up closing near the bottom of the low of this candle insinuating that bears had complete control during this specific day so that's a bearish version of the momentum channel and kind of how you should be thinking about it like a battle instead of just like candlesticks on the chart they're not just candlesticks they represent every decision made during a 24-hour period by all market participants including retail traders and institutional traders alike so that's an example as i said of the bearish momentum candle now let's move on and take a look at the long wick candle and the psychology behind that so here on the daily chart of amazon we're moving over to the stock market now we have a good example of a long-wicked candle and the psychology behind this type of candle is very straightforward and easy to remember if we're talking about it like a boxing match opening bell is the open of the candle this shows you the comeback kid this is like okay look the bears were in control nearly the entire fight and then all of a sudden towards the end of the fight the bulls took back over landed a few good punches and ended up closing close to the highs this is a very good representation and insinuation that we could see further bullish momentum in a specific market especially if we're coming off a low reaching a high pulling back to that big comeback by the bulls on a particular market so what you need to remember is momentum candles large bodies small wicks long whipped candles long wick to the bottom small body at the top is a bullish sign telling you price is likely to head higher especially if it happens at the bottom of a pullback or the top of a swing or the bottom of a swing low like we have right here which would be an insinuation of a reversal if we have a market pushing low pushing low pushing low and then we have the come back kid right here then that's telling you that the bulls could take over from that point now let's take a look at a bearish example of this by the way the color of the candle in case you were wondering does not matter this being a red candle long as we have that long wick to the bottom still still insinuates buying pressure so let's take a look at a bearish version of that real quick so still here on the daily chart of amazon you can see right here we have a candle and the psychology yet again behind this one is the open was the top of the body of this candle bulls took control from the beginning but the bears ended up being the comeback kid and winning the round overall by pushing the market really close to the low before the candle eventually closed bearish in this case so that's an example of a bearish version of a long wig candle and the psychology behind it next up we're taking a look at indecision candles you've probably heard of them called doji's after this section we're gonna be talking about very specific rules for three candlestick patterns that i have found to be the most powerful candlestick patterns to incorporate into any of my strategies so let's take a look at indecision candles right now here we are on the daily chart of the euro new zealand and what you see on this chart is an indecision candle what these look like is they have no matter the size of the wick or the bodies of this candle they have similar wicks to the top and the body with a small body if that's the case and i said no matter the size of the body the body doesn't need to be small but all we're looking for no matter how big the wicks are or that they are similar in size and what this represents is kind of like a tie in terms of the round of boxing you're looking at a at a match where the opening bell happens and then bulls push up bears push down but by the end of the round they're at about break even they landed just as many punches so that's what an indecision candle looks like there's not really a bearish and bullish example of that it looks the same both ways other than the color but they don't really represent any kind of momentum coming in the market if anything they represent indecision as i said earlier so that's the psychology behind candlesticks and how we can use wicks and bodies to help us determine what the next move out of price may be now let's jump into three of the most powerful candlestick patterns that i've found candlesticks worth trading i'll see you there [Music] before we dive into what i consider to be the three most powerful candlestick patterns in any financial market first let's talk about what a candlestick pattern is a candlestick pattern is just a candlestick that forms in a very specific way that we can identify on the chart and use to our advantage in terms of helping us determine the trend of a specific market helping us determine market sentiment as in the direction of markets likely to go and help us with set in stone rules for entries into our strategies along with many other purposes but those are the main three purposes that i use candlestick patterns for so with that said let's dive into what i consider the three most powerful candlestick patterns for any financial market but before we do that if right now you know more about candlestick patterns and candlesticks in general than you did before watching this video it would mean a lot if you go ahead and give this video a like let's dive into learning more about these three candlestick patterns the first one is called the 382 candle or 38.2 percent candle and you're gonna understand why in a second you may be looking at these going man steven that looks like a hammer or a tweezer top and that looks a lot like a shooting star why are you calling it a 38.2 candle because the name of the candlestick pattern does not matter let me explain the reason i call this a 38.2 candle is because the role that i have for this pattern and what it shows us is that price or buyers the market itself meaning all of their participants have pushed this market all the way down to the bottom of this week remember when we talked about candlestick charts at the very beginning of the video price moved all the way down to here but what happened after price moved down there buyers came in and took control pushing us all the way back up near the highs this is a huge bullish sign for me and a reason to expect bullish pressure afterwards in any particular market the reason it's called a 38.2 percent candle is because in order to objectively identify these candles the only thing i do to make this extremely simple and let me talk about the reason i do this first if you ask people what a hammer candlestick is or you show them a chart i'll put a chart on the screen and ask is this a hammer or is this a hammer candlestick you may get two different answers what i'm trying to say is that candlestick patterns unless you have rules for them are subjective and in order to have consistency in our trading we have to be objective so an objective rule i have for the 38.2 candle is that i pull a fibonacci retracement from the swinglow of the candle itself to the high of the candle itself as long as the entire body of that candle is above the 38.2 retracement then i count this as a valid 38.2 percent candle and i count this as a candle that's showing me buying pressure you guessed it it's the exact opposite for a bearish version of this pattern a bearish version of the 38.2 percent candle what do you think i'm gonna do to identify this pattern in an objective way i'm taking a fibonacci retracement from the top of that candle the high down to the low and as long as the entire body of that candle is below the 38.2 retracement then i know that selling pressure is likely to come into the market again the way we use these types of candles is if this was to occur at the top of an uptrend it might be a sign of a reversal if this was to occur in a downtrend on our pullback it might be a sign that we're about to continue in trend we're going to talk about that on a live chart after i go through the other two candlestick patterns so next after the 38.2 candle we have the engulfing candle this is a candle you've probably heard of and you may already know how to identify but in the forex market the way i identify an engulfing candle is a candle that has a larger body than the previous candle and that changes colors so for a bullish engulfing pattern i need to see that the previous candle was red that the next candle is green and that the green candle has a larger body than the previous candle that is a bullish engulfing candle for me we'll take a look at a bearish engulfing on a chart so i'm not going to have to do that right here so next up we have the close above and close below candle again all these candles are used in the same way they're all either going to be used to help you identify reversals market sentiment or help you enter on trend continuation trades here we have clothes above enclosed below candle pretty self-explanatory but a close below candle would be a candle in which the close of that candle is below the low of the previous candle as long as that happens that to me is showing selling pressure and the opposite would be true in the bullish direction we would have a close above again we'll take a look at that down on the chart but right now let's go take a look at a few live examples of the 38.2 candle first right now we're on the four hour chart of the euro dollar and there's a really good example of the 382 candle here on this chart so what i'm going to do is show you a live example of the 382 candle and also a little bit about how i would trade a setup using this candle in this case we have a 382 candle let's talk about how to spot it on real charts so this is the candle that i'm referring to hopefully you were already able to point that out based on the examples we took a look at a second ago how do we find this in an objective way a rules-based way so that our we're not guessing about what is and what isn't the candle we're looking for we just use a fibonacci retracement from the low of that candle to the high of that candle if the whole body of the candle is above the 382 retracement then we're good we have a valid 38.2 candle now in terms of this being a good trading opportunity i put good in quotations because nothing i show you is going to be 100 nothing anyone shows you is going to be 100 so make sure to stick around through the rest of the video do not go out here just start trading these blindly there's a lot more that goes into trading for a profit than just knowing these candlesticks but in this case a good example of how i would use this candle in order to enter a trade what type of trend are we in if i zoom out a bit you can tell that we are absolutely in an uptrend right this market is continuously making higher highs higher lows higher highs higher lows here higher highs and this would be at the end of our most recent pullback is where it's happening so if i get a situation like this where i get a 38.2 candle at the end of a pullback it's giving me a big indication that we could see some bullish momentum come into this market based on that fact and again remember the color of the candle does not matter because this is a red candle doesn't mean it's not valid it's the wick that we're really looking at and the body being above that 38.2 retracement but let's go ahead and take a look at how this trade played out or this candle played out as you can see it did in fact indicate a ton of bullish pressure coming into the market that's an example of a bullish 38.2 percent candle on real charts let's look at a bearish 38.2 percent candle on real charts and i'll show you how i use these types of patterns for possible reversal trades see you in a second okay see if you can spot the bearish 38.2 candle on the chart not that difficult right it's the only one that has a long wick and it's right here at the top so let me show you how to point out a bearish version of this all you would do is take your 38.2 retracement you would now pull it from the high down to the low of this wick and as long as the body of the candle was below the 38.2 retracement since we're looking at a bearish version of this candlestick pattern that would be a valid version of this candlestick pattern now again you don't use these just out in the middle of nowhere this has a little bit of positive expectancy because it is at a swing high but that's not enough what else do we need well something else that i look for and the reason this pink box that you see on the screen is here is because i like to trade these this is a little bit beyond the scope of this video but what it did a little bit of a bonus ever hurt anybody i didn't think so so right here what do we see looking left we have areas of value that were resistance before we're now coming into that area of value and we just put in a 382 candle to the downside a bearish version of that candlestick pattern so dropping back down to the four hour now here's that pattern let's see how the market reacted after seeing selling pressure in a major area of value eventually the market did in fact sell off and push down lower so those are a couple of examples of how i would use the 38.2 candle instead of showing you how i would use the other two just to speed this up a bit because i already know this is going to be a really long video i'm just going to show you examples of engulfing and close above close below candles because i use them all in the same way just realize i'm using all of them exactly the same as an entry for train continuation and or an entry for reversals so let's go ahead and dive into an engulfing candle right now and we didn't have to go far in terms of an engulfing candle a bearish version of an engulfing candle see if you can find it on the chart hopefully you were able to see this right here an engulfing candle pattern actually takes two candles to be able to realize it's an engulfing candle the first candle the body of it this little bitty body little i did it again somebody what'd i say earlier this little tiny body right here being engulfed completely by the second candle would make this a valid bearish engulfing candle so that's the way you would spot those literally as we said earlier it's just when the body of this candle the second candle is bigger than the body of candle number one so would that be the case this is a valid bearish engulfing for a valid bullish engulfing do you see one on the chart right here we have a valid bullish engulfing candle we have a small body followed by a body that completely engulfs the body of the previous candle if we label them we have one and two candle body number two fully engulfed candle body number one making this a bullish engulfing candle and a valid set up for an engulfing candle pattern so those are the engulfing candle patterns next up let's take a look at the clothes above and close below candles right now all right so do you see a close below candle on the chart right now hopefully you do and hopefully you said right here the reason this is considered a close below candle is because the close of this candle the candle number two is lower than the close or then the low of candle number one so if this had a wick the candle number one the close of the second candle would have to be below that low of the first candle making it a close below candle and this a valid way to trade and again don't just go out and start trading these there's a lot more to it but considering we're at a swing high if we had a major level of structure looking left this close below candle would be a nice looking setup and if we push the market forward a bit you'll see that it did in fact push the market down now if we continue pushing the market forward something you'll see that's really cool is did we just get a close above candle look with me right here we have a high of a candle number one and then candle number two closes above the high of the previous candle that's all we need to see this as a valid close above candle now one more nuance of this is it has to be what i call a color change so for a bullish example of this we need red to green for a bearish example of this we need green to red so there are some of the examples before we move on check out how that close above candle performed pushing the market into new highs so with that said hopefully now you completely have an understanding of all three of these candlestick patterns again throughout my trading career these have been the ones that i use the most for entries and for reasons to exit a trade along with to help me to determine the sentiment overall of any particular market and now let's move on to learning an entire strategy based around one of these candlestick patterns i'll see you guys in the next section [Music] okay so let's talk about the candlestick pattern strategy you're about to learn before we do that funny story about this this was actually a strategy that i had initially only planned a release to eap members in our private vip group but i did a video a couple of weeks ago or actually a couple months ago excuse me on technical analysis that got like 2 million views in the last 2 months i'll put it in the top right corner of the screen if you want to check it out and i accidentally had the written version of this strategy on the video for at least five minutes so around two million people saw it i thought to myself why not go ahead and show it to the rest of the youtube world in this video but whenever we're looking at strategies the first thing you have to understand as a beginner is it's great to understand technical analysis it's awesome to understand candlesticks and candlestick patterns but that's not going to get you to a point of having a profitable trading career in order to get to a point of making profits we need to have what's called an edge or an advantage over markets the way we get that advantage that advantage is what makes us money over time and the way we get there is by having a consistent way of trading think about your trading profits would you want them to be consistently going up with small pullbacks or inconsistent going up and down like a roller coaster you'd probably want them to be consistent right if you want your trading profits to be consistent you have to have a way of trading that is consistent that way of trading that is consistent is what we call a trading strategy and that's what we're gonna build right now in order to build a trading strategy i always look at four main components and i call them we're gonna talk about this in depth a little bit later c e s t what this stands for is conditions your entry your stop and your target so at any point you have a strategy your conditions are going to be things like trend an indicator lining up support or resistance level some kind of area of value those are all labeled conditions your entry reason is going to be why did you actually press that button in our case it's going to be a candlestick pattern your stop loss is going to be where are you getting out if you're wrong and your target is an idea of where you're getting out if you are right if you don't have all of these in the strategy you're trading right now i would go and start with something like this and create a new strategy or build on this with the strategy you're already using and if you're not using a strategy yet understand that you need a consistent way of trading with that said let's dive into the strategy as you can see here on the screen what we're waiting for is a really simple setup we're going to be using the 20 period moving average which is the blue line you see on my screen as trend identification and as an area of value when we combine those two things what are they that is our conditions at that point we're going to be waiting on our 382 candle or 38.2 percent candle to touch the 20 period moving average and wick off of it and i'll show you what i mean by wick off of it in just a second when we go to some examples at that point the close of that 38.2 candle is our entry and then we put stops and targets accordingly which we'll go over when we look at some live examples of this again it's not some crazy wild strategy it's consistent but over the past since 2018 it's provided a 65 64 to 65 percent win rate with a one-to-one reward to risk ratio which is a very very good strategy you can adjust the win i mean the um reward to risk you'll probably have a smaller win rate but again that's up to you you can go test it i haven't fully optimized this yet but let's look at a couple of live examples on a chart okay so right now on the chart what would we be looking for in order to trade this candlestick pattern strategy we would be looking for the conditions first what are our conditions well if we need the market to be in trend according to the 20 period moving average all that means is we need truck price to be trading above that 20 period moving average is that the case yes so our first conditions met we then need price to touch the 20 period moving average with a wick has that happened no it has not so what do we wait on well we push the market forward and see what happens did that candle touch the 20 period moving average wick off of it and wick off of it this is what i mean by wick off did the candle touch and then get pushed back up by price remember the psychology of a candlestick what this is showing you is that bears tried to push us below the 20 period moving average and then bulls became the comeback kid and said nope landed a few punches pushed themselves all the way back up near the high of this candle showing a lot of buying pressure so we have this combination of a lot of buying pressure while we're in the condition of being in an uptrend above the 20 period moving average and the condition of that 20 period moving average being an area of value because it oftentimes acts as support combining all of that is our entire reason for entry so the reason for entry itself is what the close of that candle so at this point we have our conditions met we have our entries met which is the close of this candle and the way we can tell again 38.2 candle how do we tell pull a fibonacci retracement from the low to the high of that candle if the entire body is above the 38.2 retracement then that's a valid 38.2 candle i didn't do that because i could just tell that it was without having to pull the fibs but if you're new you may have to pull the fibs for a while before you can see it as well as i can so at that point we have our entry what's next we have conditions met we have our entry met next we have the if we're doing the cest we have the st or stops and targets so anytime you're getting into a trade you want to make sure for a fact that you at least know where you're getting out if you're wrong this big crash that happened in the cryptocurrency market so many people lost their life savings because of the s in cest they didn't have a stop they just believed in certain cryptocurrencies to the point that they were willing to risk all their money without any type of stop loss and that is a recipe for absolute disaster and something you don't want to be doing so after c and e we have our entry we need an s we need our stop loss where are we getting out if we're wrong in this case use whatever kind of stop-loss you want to i still haven't optimized this strategy completely essentially what i did was 20 pips under the low as long as the at-hour value average true range was below a certain number i'm not that's beyond the scope of this video though so what we're gonna do for this example is just 20 pips below the low of the entry candle so right now down to that we have 43 we add our 20 pips to that we have 63 so 63 pips for our first for our stop loss and we are using a one-to-one reward risk on this specific example and as you can see we did not get stopped out quite right here that was probably about five pips away from our stop and we did in fact end up hitting targets so that is a bullish example and a walk through of this cest using it in order to create a strategy around the 38.2 candle we're going to take a look at a bearish example of this now to help you get a better grasp on it bet i can find one really quickly whether it be a winner or a loser i do believe i just found one maybe even two okay so here we have a bearish example as the market is meeting our conditions and our entries how so the market is trading below the 20 period moving average right if that's the case what are we waiting on if the market's trading below the 20 period moving average then we're waiting for a candle to wick off of that 20-period moving average does this candle have a wick that goes through the 20-period moving average and then sellers took back control pushing the market down to the point that the entire body of this candle is not touching the 20 period moving average yes and if that's the case then we have a valid bearish version of this candlestick pattern strategy our stop if we were doing it like we just did is going to be 20 pips above 53 plus 20 73 and then we have a one-to-one reward to risk ratio that does in fact hit again feel free to take this and go optimize it for better targets 1.5 two to one three to one ten to one whatever your muse is whatever you feel like doing but i just wanted to share this with you again i've only tested this on the pound new zealand four hour chart but it gave a bad ass return on this chart to the point that i was going to put it into and still plan to put it into the eap training program even if it only works on this pair because it performed so well if you're interested by the way in other strategies that i use like this then we have that included in the eap training program along with a full training course from beginner all the way to advanced that'll teach you everything you need to know about trading in the forex market this course also comes with priority email so you can email me with any questions and i personally will get back to you if they're trading related questions and it comes with three to five email alerts per week and what i call the best setups of the week every monday i'll jump on a video and i'll show you guys the best setups that i'm looking at throughout the next week coming and that happens every monday if you're interested in that feel free to check it out it'll be the top link in the description otherwise let's continue now hopefully you have a good grasp on this candlestick pattern strategy it was extremely simple again use that cest for any strategies that you try to create but now let's move on to combining multiple candlesticks in order to make price action patterns we can use for possible reversal trades i'll see you guys there [Music] price action patterns are identifiable patterns we can see on the chart that can help us to determine if a market is likely to reverse it can also help us to determine where to enter those possible trades and even tell us how we should be exiting or excuse me where we should be exiting trades we're already in unlike candlestick patterns that combine just a few candles or either just one candle like the 38.2 candle price action patterns tend to be a bit larger and have between 10 to maybe 50 candles involved in those now for me throughout my entire trading career there is one price action pattern that has absolutely ruled over the rest of them and it's the only one that i still consistently trade to this day and that is the double bottom and double top price action pattern i know that's two but it's just essentially one of them's this way and one of them's upside down so that's what we're gonna be looking at today is i'm gonna teach you the very specific rules that i have for double tops and bottoms because as traders what is our goal to have a consistent way of trading that provides an edge the problem with double tops and bottoms a lot of the time is that some traders may see this as a double top whereas other traders may not because of a lot of different subjectivity between the two traders we want to make some rules up to where every time we trade a double top we are trading it exactly the same way where every single time we see a double bottom we know exactly when we're going to enter that trade so what i'm going to do right now is go ahead and dive into double tops and bottoms and show you the exact rules that i have to make sure that i'm consistently trading these patterns and how i use them to consistently make profits in the market i'll see you there for this pattern what i'm looking for and the way it looks on a chart sorry i didn't do that before the way it looks on a chart is a market that comes down creates a level of support then bounces up to a level of resistance but instead of continuing down in this downtrend we come down we re-test this level of support and we're supported yet again so much so that we push up enough to break and close above what is called the neckline so this is bottom number one of a double bottom bottom number two of a double bottom this is referred to as the neckline and that is the initial pullback from the first bottom that we need to break in order to classify this as an actual double bottom so a way that most traders enter this is either by entering exactly as the market breaks that neckline or one of my favorite ways to enter and the way we're going to talk about and discuss entering today is waiting for the market to break and close above that neckline and then getting a pull back into that neckline the reason i trade double bottoms like this is because i can get smaller stops therefore having a larger reward to risk ratio on these types of trades so that is how we spot double bottoms let's go over how we spot double tops first and then i'm going to talk about how i actually use these patterns to consistently make badass trades in my own trading let's check out a double top though so a double top is going to be when the market pushes up to a level of resistance then pushes down in our initial pullback but instead of continuing this uptrend we now test that level of resistance once more and find resistance yet again the market then breaks through the neckline so on a double top we have top number one right here we have top number two right here and the support level that was created after top number one is known as our neckline we need that neckline to break to validate that this is actually a double top and the way i said we're going to be trading these today is by waiting on a pullback after that validation after that break we want to see a pull back into our level of support and that's where we're going to be placing possible trades and looking for the continuation down now before we get into how i use it i know i said we're going to right after this i want to talk about those objective rules so the objective rules i have for a double bottom let's actually start there is i need to see the first bottom and the pullback at the point that i see this first bottom and a pullback what i do is place a box my box is going to be let me make this way way more easy hold on here we go okay so at this point it doesn't look like a double bottom right but i need an objective rule for how i'm going to enter a double bottom so what i do at this point whenever i see a bounce like this is i place a box from the lowest bodies of this first low to the lowest low of this first low that is what i call my termination point what i want to see is the market retest this point a candle can close inside of this area a wick can go past this area we could see nothing but the wick of a candle touch this area all of that i would consider a valid double bottom what i would not consider a valid double bottom is if we get a candle but the wick doesn't touch my area or if we get a pullback and we see a candle that closes all the way below my zone those two situations are no longer a valid double bottom for me so those are my objective rules for a double bottom we'll click play here and see what the market does as you can see we've now entered into my termination zone we have not closed below it therefore we have a valid double bottom so far still is this valid yes no candles closed below my zone therefore i'm still in considering this a valid double bottom the next thing i need to see is a break of this neckline once i see that like we do right there i'm then waiting for this market to pull back to that neckline to place my possible entry once we do that and pull back to the neckline i want to see buying pressure for me buying pressure is nothing more than a green candle once i see buying pressure here's i'm just explaining to you exactly how i trade these double bottoms or exactly how a lot of people trade them i trade them slightly differently but for the purpose of this video this is what we're going to talk about so i would place an entry there we have a 17 pip atr right now so 17 plus 30 is 47 47 pips and i want to target my next level of resistance which is right up here in this area so at this point we have our trade setup we've had buying pressure after a double bottom has been confirmed by the breakout and a pullback to the neckline plus buying pressure okay cool we're in the trade let's see what happens eventually pushing up down up down this is the reality of trading guys you will be tortured emotionally during situations like this but it's just what happens sometimes while we're trading and there we go finally hitting targets you have to have emotional fortitude that's something unfortunately we're not gonna have time to discuss in this video because it is going to be well over an hour long i already know that but that is how i would trade the double bottom the double top would be the exact opposite of that we'll go over that really quickly you should have a pretty good idea by now but here on the double top the only difference is i am putting a box let's actually does it sound like i'm saying pudding it does to me let's put a box right there so now what i'm waiting for for a double top it's the market to push up into an area of resistance and have a pullback once i have that pullback i'm placing a box from the highest bodies of the first top to the highest wick of the first top this is what i call my terminations on i want to see a candle that at least touches that zone but what i cannot see is a candle that closes above this zone a candle can close inside of the zone a wick can go past the zone the only thing i cannot see is either a candle not touching it at all or a candle closing above it so with that said click play you already know what this turns out like yes we have a valid double top and yes we broke the neckline the way i would trade this is by waiting on selling pressure at the neckline as the market pulls back up clicking play yet again selling pressure would be this red candle stop loss at that point would only need to go above our swing high and then we could target whatever we needed to pushing lower all right so just one more example of double bottoms and tops and to add an extra confluence or an extra condition to this what you could do and let's start like this on the chart you see in front of you right now what would we be looking for in order to classify this as a double bottom well right now we don't have a double bottom we just have a first bottom and a pullback which gives us an indication that we need to start looking for a possible double bottom which is what we're going to do and at this point what do we need we need a candle to push down touch this area not close below it you know the rules we just went over them so let's see what happens we push the market forward one candle at a time we get in that zone then we get a green candle do we break the neckline eventually we do in fact break the neckline so at this point we're waiting on a pullback to the neckline right here so this would be the neckline of this particular double bottom but as an added confluence what i like to do and the way i like to trade these and the most accurate way to trade like this is to wait for this situation to happen and only trade this situation when it aligns with a level of major structure so this happened to be an area of also resistance and support looking left an area of major structure out of the euro yen we're on the euro yen four hour chart right now so at this level around 128.33 we already had support and resistance looking left that's adding confluence adding a condition of a major level of structure or an area of value combining that with our double bottom and combining that double bottom with eventually a pullback into that and a green candle for entry that is exactly how i like to trade these types of patterns and in this case you can see that it worked out really well they are in fact reversal patterns so i like trading reversals with these patterns as you can see we had lower highs coming in lower lows and then this market created that double bottom so with that said that's a look at how i trade this price action pattern and again guys we're into some more advanced material now at the beginning of the video you were just learning candlesticks and candlestick patterns that's very basic information but combining these into a rules based strategy we're getting into the advanced stage now and what i'm going to do next is talk to you about cest and break down how to build strategies around combining price action patterns candlestick patterns with other confluences that you learn in technical analysis and we're going to talk about how to build a profitable trading plan you can stay consistent too so up next we're talking c e s t conditions entries stops and targets i'll see you there [Music] all right so in order to talk about cest i first want to go over what it takes to become a profitable trader anyone who is a profitable trader has accomplished these three things i call this the triangle of trading success and inside of this triangle of trading success are all the traders who have made money in order to make money in the industry of trading there are three qualities that a trader must have above any others and that is a strategy that makes money over time and that is rules-based so they can stay consistent to it that is a risk management plan that keeps them out of their emotions when they're in trades that keeps them from blowing their account initially and that is good trading psychology which can also be referred to as discipline if a trader masters all three of these it's inevitable that he becomes profitable but the first step of that he or she becomes profitable but the first step of that is to have a strategy that makes money over time and that is based on a set of rules that's consistent imagine a trader coming up to you and saying i trade double bottoms what does that even mean i trade trend continuation but why why do you enter the market like that's not that's not a strategy that's a that's a price action pattern in no way is that a strategy we need a set of rules where we know exactly what our qualifications are for the first bottom what validates a double bottom what validates us actually entering the market do i need the break of a neckline do i need the market to be oversold when i buy the double bottom where do i put my stop where do i put my target all of these things are things that traders normally don't think about and it's a huge reason so many traders fail is because they don't have rules they can stay consistent to with their strategy and the way we create these rules that we can stay consistent to is through a process of c e s and t which we all already know what stands for if you are with us for the rest of the video c is conditions e is entries s is stops or your stop loss where you're getting out if you're wrong t is targets where are you getting out if you are right now again this is just the first step of becoming a consistently profitable trader unfortunately we don't have time to go over risk management and trading psychology today because this video again is probably going to be a little bit over an hour long but let's dive into cest with the strategy that we just looked at on the double bottom with the price action pattern and we're going to define cest while we go through and look at that strategy one more time so the entire double bottom strategy that i just taught you consists of conditions entry stops and targets what are the conditions i need well we talked about that extra condition towards the end of the last section that extra conditions is i need or extra condition excuse me i need to be at a major structure level i call these otz or optimal trading zone i need the market to be in an optimal trading zone so the first step is to see are we in an optimal trading zone let's put a horizontal line on the chart where the next place if the market pushes down will be an optimal trading zone and that is in an area of previous support and resistance so that condition once we get down to that area will be met there we go now we have that first condition met what's our conditions for a double bottom when we need our first bottom and then we need a pullback right we need the market now to start heading higher so we have our first condition met with us being at a major structure level that's conditions now we need our second condition condition one condition two is we need that first pullback and since we're going down the pullback is going to go up so here we go first pull back note this is not a double bottom by the way just because we have this one pullback candle and then a green candle i do not count that as a double bottom i need to see more candles forming this double bottom let's continue pushing do we have our pullback yes we do what's the next condition so we have condition one we have condition two we have now condition three coming down and re-testing this area as we discussed earlier let's see if that happens we'll speed up a bit now yes we came down we retested this area that's through conditions three the best way to do this is to think about the strategy you're trading and can you have a checklist beside your desk check off all your conditions and then check off when you get an entry pattern to enter the market and then check off when you place your stop and target if you can't put it in a checklist then you need to re-evaluate your strategy and make it more rules-based so at this point condition number three is met we're in that zone what's condition four condition four is we need a break of the neckline of this double bottom let's click play we get a break of that neckline condensed condition number five is i need a pullback to that neckline so those are the five conditions right we're still on the c what's our e the entry in this case from the strategy we've talked about earlier is just a green candle i want to see buying pressure and this green candle happens to be what type of candle think back to trading psychology this is a momentum candle also an engulfing candle at the previous neckline this has given me a lot of reasons to look at this and expect this market to head higher so the entry would be at that candle now we have c and e what's our stops and targets for me the stop-loss would go below the swing low and you need to have a specific rule but just to speed this process up a bit we would have a stop loss below the swing low we would then have a target and for me the target would go back to previous structure resistance something like that is how the whole trade setup would look and since i broke that down for you while we were looking at it can you now see how important it is to have c your conditions e your entry s your stops and t your targets and each one of these needs to have objective rules for them you need objective rules for your conditions your entry your stop and your target and now any strategy you create now that you have this knowledge you need to put to the test with cest any strategy you create or learn from someone else you need to modify any strategy to fit in with conditions entries stops and targets that way it'll take the emotion out and you can have an objective way to enter the market you can then back test to see if that objective strategy is profitable or has been in historic data to give you a good idea of what's likely to happen in the future so now you should have a good handle on cest and everything else we've discussed in this video let's do a quick overview right before we do though again if you're interested in some more advanced training and you want to learn more about how to trade in financial markets like the forex market the eap training programs are vip program and it's linked at the top of the description with that said let's dive into a recap so we can put it all together and then this over one hour long video will soon be done i'll see you soon [Music] all right so now you are armed with everything you need in order to understand not only understand but use candlestick patterns and candlesticks themselves in order to help you create a solid foundation for a profitable trading career we went through a lot today we started off with what candlesticks are and what candlestick patterns are you know that candlesticks are a physical representation of price movement during a certain period of time you know the way to read a candlestick is by looking at the open low high and close of that candlestick in order to determine what happened during that certain time period you know the psychology of a candlestick what it means if there's a momentum candle that has a large body and small wicks if there is a doji candle or an indecision candle telling you that the market really doesn't know what's going on and a long wick candle that's the comeback kid in the boxing match you now know three of the most powerful candlestick patterns that i have found in my own 10-year trading career that happen to be the 38.2 percent candle the engulfing candle and the clothes above closed below candle you learned how to incorporate those into a strategy whenever i taught you an entire trading strategy built around the 38.2 candle we looked at on the pound new zealand 4-hour chart you know how to combine candlesticks in order to make price action patterns that are time tested proven to be profitable and now you have a consistent set of rules in order to identify double tops and double bottoms to trade reversals and last but not least you now understand c e s t conditions entry stops and targets so that you can not only take the strategies and the techniques that you've learned in this video and convert them into rules based easy to follow and profitable strategies but you can do that with anything anyone else teaches you or anything that your brilliant mind comes up with your creativity is your only limitation go out test a bunch of stuff with cest being the groundwork and the foundation of a strategy and you will be surprised at the results you come up with i really hope you guys enjoyed the video if you did please don't forget to smash that like button comment below if you made it to the end because dang this has been a long one i hope you guys have a great rest of your day i hope you trade green from here on out and i'll talk to you in the next video see y'all soon

Channel: The Trading Channel

Views: 541,360

Rating: 4.9670072 out of 5

Keywords: candlestick patterns, candlestick charts, candlestick analysis, candlesticks, candlesticks explained, candlestick trading, candlestick charts explained, candlestick patterns forex, candlestick psychology, candlesticks for beginners, candlestick patterns for beginners, candlestick charts for beginners, candlestick chart basics, candlestick chart technical analysis, candlestick chart secrets, candlestick bible, candlestick exercise

Id: hEUALimWs7E

Length: 58min 21sec (3501 seconds)

Published: Mon May 24 2021