[Music] welcome to today's Deep dive into the only Candlestick pattern you'll ever need as a Trader now it doesn't matter whether you're trading Forex futures cryptocurrency or you're trading stock because what I'm going to walk you through is the universal language of the financial markets that is in Candlestick chart patterns now if I could choose only one Candlestick pattern to use for the rest of my career it's the pattern that I'm going to share with you in today's episode now as you probably know most Traders lose money and what's also true is most Traders don't understand how to recognize the buy and sell signals that are plain as day in the Candlestick charts and it's because they haven't yet learned the language of the financial markets my job here today is to help you better understand and be able to recognize these signals in these chart patterns so you can apply them in your own trading starting today at the end of the episode I'm going to share some recommended reading for those of you that want to continue your education learn more about technical analysis and expand your own knowledge of some of the highest probability Candlestick chart patterns but the goal of this episode is to keep it simple so we're going to jump into the Whiteboard and get started now I want to make sure I don't leave anyone behind here so for those of you who are new to Candlestick chart patterns I'm going to give you a quick breakdown of what they are historically we used to have simple line charts which looked like this a line chart was formed by the last price of a stock on a particular day and you just connected all of those prices the problem is the last price is only one piece of information and it leaves out all of the detail in the context of what may have happened to that stock during that one day let's just say for example that on one of these days the stock squeezed way up dropped back down before closing at this price well you wouldn't know that on a simple line chart so the origins of Candlestick charts are actually several hundred years old they began with uh in Japan with rice Futures so the Futures Commodities market for rice and they use Candlestick charts to help you better understand the price action during each period of time so this is what a Candlestick look looks like this is the body right here we call this a candle it this candle right now is a very large green candle which is fine and if we an upper Wick and a lower Wick this would be a traditional candle a green candle fill in the body green a green candle means the open was at the bottom of the body and the close was at the top these Wicks reference the highest price of this period of time and the lowest price of this period of time so a candle is created with 1 2 3 four pieces of information the open the close the high and the low now this candle right here could represent any period of time let's say for instance it represents one day of time that means at 9:30 a.m. when the market opened this was the price at some point during the day the stock hit a high or whatever instrument it is it could be a a a Forex pair it could be anything it hit a high it hit a low and then it closed at this price this would be the 4M closing bell if this was a stock so this is all of the price action confined within one day of time now we could also look at a chart on a different time frame if we're looking at a daily chart then every single candle is based on one day if we're looking at let's say a five minute chart then every single candle is 5 minutes of time the most popular time frames for active Traders is the 5 minute the 1 minute and the daily this gives us a good perspective of what's happening with a stock so this right here is an example of a daily chart this is the S&P 500 and each one of these candlesticks represent one day of time this chart gives us a lot of context we can make it really big so we can see lots of time we can see years and years of price action in fact there are some stocks like General Electric that actually go back over a hundred years so you could look at over a 100 Years of Candlestick charts and what these serve for us is the basis for our technical analysis what's important to recognize is that every active Trader is going to be using these types of charts now I suppose there are some traders who may still use LINE charts which would be incredibly primitive and there may be some traders who use some obscure type of chart but that's going to be very View and far between most Traders are going to use Candlestick charts and so the patterns that I'm going to be sharing with you today the number one pattern is based of course on a Candlestick chart so if this is a daily time frame we can also uh at any time switch it up so I always keep my daily chart when I'm looking at a stock I have four time frames as you can see right here I have the daily which is down here in the bottom uh left corner so this is my daily chart right here then right above it I have a five minute chart so this is five minutes of time that means each one of these candles represents five minutes so these are five minute candles it's a f minute Candlestick chart this allows me to zoom in on a particular day so on this day we can see the S&P was red okay that's fine that's the big picture but there's a whole lot that happened inside this day and that's what we get from the F minute chart so we pull up the FIV minute chart we Zoom it out a little bit and we see all right so this is what happened initially the S&P was up a little bit premarket and then at the 9:30 opening bell more or less was sideways until it started to pull back a little bit going into 2:00 started to come back up around 2:30 and then at about 3:00 it just rolled over hard so we may speculate that could there have been some type of news that came out later in the afternoon maybe we'd have to check to see if there was a catalyst that contributed to the selloff you can also see down here these bars are called volume bars so this is uh telling us how many shares transacted on the stock at this particular Candlestick time so what we notice here is that as the selling increased the volume increased as well this is a Telltale sign that there were people that were just ready to unload on the stock so that's our 5minute chart but we may want to get even more zoomed in than that we may say well that's a 5 minute chart I want to get even more zoomed in on those last you know 30 minutes before the closing bell so now we get zoomed in here and actually what we would notice and this is very interesting is that the highest volume candle is green so this is this tells us a little bit of a different story if we jump back here just for a moment and look at the 5 minute chart the 5 minute chart show that the highest volume candle was red and while that was true on a 5minute time frame by getting zoomed in we realized that although that 5 minute time frame was a red candle the highest volume occurred on a green candle so now we're getting a little bit more detailed we're getting different information as an active Trader we have to use these short time frames because otherwise we could be misled into thinking that there was weakness when in fact it looks like there was some buying and that then led to the uh Market bouncing a bit into the after hour session now something that I like to do is I like to get even more zoomed in and I use a 10c chart I don't use it a lot but I will pull it up when we have a stock that's moving very very quickly and what you'll see here is that really it was the final 10 seconds going into the close that we had the most volume and then 10 seconds after the closing bell I use 10-second charts especially when I'm trading an initial public offering because an initial public offering moves so fast that minutes minutes that's not enough time so now you have a good understanding of what a green candle looks like which of course is my favorite color but now let's talk just briefly about a red candle so a red candle opens closes has a high and a low again we have four pieces of information the high the open the close and the low so notice that the open and the close are inverted versus a green candle a green candle opens low and closes High a red candle opens high and closes low so this is why it's important that the color that the Candlestick colors are different because that way we can understand that this is green and this is red now having said that I suppose we could look at our chart here for an example if if we look at a stock we look at uh just Reddit for instance it it shouldn't be too hard to tell the difference between green candles and red candles just based on what's Happening so if we look at the way the price is moving higher here I could go in for instance and I could I could change the color of the candle um I I'm I'll do it just for the sake of argument we'll make them just for the sake of it both white so if they're both white here can can you tell which ones are likely to be green or red now that's cheating if you're looking at the volume bars so let's just collapse that for a second can you tell which ones are are likely red or green I think you should be able to because you would know that this candle surging up could not have been red because the price doesn't go from here to here and then jump to here and decline right if this was a red candle it would have opened here and then closed down here which means it's somehow jumped from this price all the way to this price so this is clearly a green candle it would be it's a candle that's going up however some of these candles in here well that that would be a little bit harder to say it could be green or it could be red and you know what's interesting is those candles in that range it actually doesn't matter as much whether they're green or they're red because what's happening to the stock price during these periods of time and again I'm saying stock price but this is the same applies if you're trading Forex Futures commodity uh Forex futures um you're trading crypto it doesn't matter the concept is the same because the language of the financial markets is a universal language What's Happening Here is the price is going sideways we're in a period of consolidation and when you're in a period of consolidation whether it's green or red it doesn't really make a huge difference because the price more or less is going sideways it's a little bit indifferent so there naturally will be a couple of green candles and a couple of red candles that's very common as it goes sideways so really what's important is that you're able to understand when it's trending up the price is trending up the price is trending up and then of course here where we're trending down and so this right here is not the view that most people would use most people would color the candles green that are going up and they would color the candles uh that are going down a different color now there are some people that have issues with color blindness and so for those people um they may do different types of shading and stuff like that just to make it uh easier to read and that's fine there's nothing wrong with doing that um that's that's totally okay to do it's to your preference ultimately if you want to have your candles blue and white or whatever that's fine too it shouldn't be hard to tell which ones are going up and which ones are going down okay so back here on the Whiteboard so now you have a good understanding of the anatomy of individual candlesticks now candlesticks communicate different types of Market sentiment so for instance let's talk about some bullish candlesticks these ones are bullish which which is another word for this is where the buyers are coming in okay so no doubt a candle like this is very bullish a big green candle that opens at the bottom and closes at the top it didn't make a low the price never went down and it didn't make a a high outside of the close because it closed at the high that is the strongest candle you could get now you could have a candle like this where the stock goes from $2 to $8 in one candle I've seen that happen before all right so you could have a huge candle or this could be a smaller you know 20 30 Cent candle as well but the size of it could be relative but this is a bullish candle it's the most bullish now let's look at a different candle let's look at a candle where we did have a little bit of a top and we had a little bit of a bottom still a very bullish candle it indicates the price dropped for a second popped up a little bit and closed high now what about this what about this kind of candle here where we have this long lower candle wick so this type of candle what this is communicating is that the price opened right here right so we had our open then we that was over for open and then we had um our close which is also our high so the close and the high are the same but the low is way down here so this is actually bullish because although the price dropped it rallied all the way back up and closed to the top so this let's just say this is a 5minute candle if that was a five-minute candle what do you suppose the one minute candles would have looked like now remember if we so if we zoom in on this we're going to do a little magnifying glass we're going to zoom in on this candle right here and what we would see is that the price opened and pretty much immediately the stock dropped it declined in value then it came and we'll make it so it opens right about the same price so it opened right here it came all the way down to here so we had a red candle coming down the whole body should be filled and then it rallied back up so all of a sudden it it closes down there and then it opens and it surges back up pretty quickly it moves a little bit higher a little bit higher a little bit Higher One 2 three four five candles it could have looked something like that so if we had zoomed in on this candle this is what we might have seen now it could have been a little bit different you know it certainly could have been the case that instead of um like that it was you know maybe two red candles and then a small green candle you know like that so it could have been made up slightly differently but what we know is that this was the 5 minute and we know that inside that 5-minute candle the price declined and then came back up so this candle is telling us a story okay so that's it's not as bullish of a candle as this candle here but it's still relatively bullish now let's look at another candle just as a as an example um let's say we had a candle like this it's going to be a green candle but is this bullish o I don't know so here we open we close this is our low um and this is our high so again if we zoomed in on this candle if we did a big zoom in what we would see is that the stock opened it squeezed all the way up to here and then gosh it came all the way back down to close about there and then that's how we would connect this Square here and that upper candle wick so that is not not as bullish of a candle that's actually showing that the sellers were able to push the stock back down within this Candlestick period so this is a candle that's communicating a bit of weakness now let me show you another candle let's look just for a moment at this type of candle right here this is a candle that shows a lot of indecision the price went down it came up and then it closed at almost the exact same price as it opened the name of this candle is a dogee that's the name for a candle that opens and closes at more or less the same price it could be a small green candle it could be a small red candle but more or less this is called a dogee this candle right here this is called a shooting star this candle right here is called a hammer this is a hammer and these are just longbody Candles now we actually have similar candles that can take place in the context of weakness so some of the bearish candles bearish means weak some of the bearish candles the most bearish of course would be a big red candle a second candle that's not quite as bearish would have a topping tail and a bottoming tail like that we could have this candle right here we could have the inverse of that candle here and then of course we could have a dogee now dois whether they're red or the green it it's it's almost means the same thing because it showing such indifference it's it's showing that clearly the price moved up came down and then was basically sideways uh these candles here very strong bearish candle very weak again very weak this candle however this shows less weakness because the buyers came in and were able to Rally it back up so even though we opened high and we closed lower we still rallied off the low this is a very weak candle this candle although the price came up it got pushed way way back down so these are different individual candlesticks that communicate sentiment in the market okay so our job as an active Trader is to be able to read these individual candlesticks and understand the sentiment that they're communicating now when we're talking about the ultimate Candlestick patterns we're looking at multiple candlesticks stacked together that create what I would say our Universal bu or cell signals so let's jump back on the Whiteboard okay so now I'm going to start to break down for you the anatomy of what I would call the strongest Candlestick pattern the only one you'll ever need Okay so let's let's first draw this uh dotted line here so again we're back into a little bit of a line chart here just for Simplicity sake so this is a a stock that's clearly going up in value right so we had a little pullback a little move up and a little higher that can that marker is kind of running out of ink Okay so we've got this move up so where on this line chart would you want to be a buyer would you suppose I would suggest being a buyer in these areas right here now the challenge with being a buyer in this area is in that moment you don't know what's yet to come right you don't know for sure the stock is going to go for all you know it could start doing this right it could start to decline and you say Ross gosh how do I know if it's going to move up or if it's going to go back down the secret is in the Candlestick pattern so with a line chart there wouldn't be a lot you could read into it you it would be a little bit of a guess now there are some technical indicators that you could apply to your chart uh one of them would be a moving average and if you saw for instance that the price was coming right to a moving average maybe you would say all right well we're near the support of this moving average moving averages average the price of the stock over a fixed period of time and they serve as support and the reason they serve as support is because so many Traders use them the reason stop signs work is because people respect them technical indicators and Candlestick patterns are the same way when people see this very obvious stop sign on a chart they're not going to buy when they see the green light they're going to feel confident buying so one of the indicators that we might use would be a moving average but I think the bigger thing to understand here is that the reason this would be interesting the reason I might want to buy something like this is because it's moving higher so I am a trend Trader I trade momentum that means I'm looking for something moving up I want to buy it relatively High and sell it higher now you could do this really all over the financial Market you could do this with Forex and with for Forex Traders what you're typically going to be trading are breaking news headlines so you have fomc meeting minutes you have economic news that comes out uh unemployment numbers things like that and this has the ability to move the market and it can move the currency market so you have really bad unemployment numbers come out all of a sudden the currency markets start to move so you would look at some of the most popular pairs for possible trades now if the market began declining you would see that that's a trend if it began moving up you would see that's a trend so this is the same with Futures this the same with Bitcoin with cryptocurrency it's the same with stock generally what we're all looking for in trend-based trading is a catalyst that begins the trend that's what gets things started so typically at the very beginning of the move way back down here boom boom boom is a news Catalyst that is news that's what get got everything started now the challenge with news is that there is news that's coming out all day long on you know from all different economies all around the world that affects different currency pairs that affects Futures that affects potentially crypto that affects stocks how do you know which headlines are actually going to move the market you don't and when the news first comes out it might sound good and the price drops or it might sound bad and the price goes up so it can be very very difficult in fact if you were the first person to always have news you probably wouldn't know what to do with it because you would look at the price and be like well the price isn't reacting so what do I do we need the price to react in order to help us form a bias so I wait for news to come out and I'm primarily trading stocks so I'm waiting for news to come out on stocks and then as soon as it comes out I look for the reaction so once a stock starts moving up here like this at this point we're going to start getting I'm going to start getting alerts so I'm going to get a Boom Boom audio alert audio alert audio alert audio alert as the price is moving higher this is reflected in uh this software that you see right here so ibio if we scroll back czo CZ this was hitting my scanners as the price was moving higher and this was moving higher in the after hours trading session so if we look at the chart hello look at that this went from $6 up to $8 a share that's a great move right that's hey nothing to complain about there that's a really nice move but how would you know that's happening you wouldn't know that's happening if you weren't either subscribed and using these types of scanners or I don't know I mean maybe you would find on social media trending or something like that but it it could be hard to find things if you're not using the right tools so these scanners will show me something that's moving and then I go and I check the news catalyst now there are times where the markets are moving and there's not really a a super clear Catalyst that's driving the momentum but even in spite of that more often than not there is a clear news Catalyst okay so the news comes out step one step two the stock or whatever it is the financial instrument is hitting scanners that's indicating that the price is moving higher so now I'm starting to watch it and as I see it moving higher what I'm thinking is man this thing looks awesome it's super strong where can I buy it how do I get in this thing that's moving and that's the pattern that you need to know okay so what we want to do is we want to buy something that's moving but we also have to think about risk so for instance if I just press the buy button right here if I just bought right there that would be a little bit of a problem because well it's already made this bigy move from down here to here right I might what if I press the buy button right here at the very top then I'm going to lose as it comes back down and if it does end up doing all of this selling off like that then I bought at the top and I'm selling at the bottom and that is a rookie move that's what losing Traders do now I've done my fair share of that so don't feel bad if you've done it too but what I want to teach you is how to buy on the pullback and sell into the move higher that is the difference between success and failure okay so this is the area where we're trying to get dialed in that's the area where we want to buy but we're trying to decide is this going to go lower or is it going to go higher so this is where the candlesticks are going to come into play okay so we're going to go ahead and erase this and now we're goingon to get dialed in on this pattern okay so let's play out the whole scenario let's say it's 8: a.m. just for the sake of setting a time all right 88 a.m. boom a news headline just came out we've got news on this stock and instantaneously the price is going up now the way this happens for those of you that are curious about the mechanics of this is that when the news comes out highfrequency trading algorithms read the news they're trained to read the news to look for keywords and then based on those keywords execute orders in real time instantaneously now as they're executing orders the price PR begins to move up so the price starts surging up now at this point as the price moves higher it starts triggering scanner alerts now the scanners that I'm using have some specific filters so to share with you a few of those filters that I'm using we're going to say number one up 10% I want to see if the price is up 10% because I want to see this thing is moving number two uh I'm going to look for I I this is a personal preference but I'm going to prefer um when the price is between $1 and $20 number three I want to see that it's got high relative volume so I want to see the volume is coming in as this thing is squeezing up number four I want to see the number of shares available to trade is less than 10 million now this is something that many of you probably understand uh and it's true in in in all areas of the market with Bitcoin there are a limited number of Bitcoins that will ever be available with stocks when a company does it initial public offering there's a limited number of shares that are available that represents the supply the more Supply the more demand you need in order for the price to move so when you have a stock or a currency or whatever it is with a limited level of supply and demand picks up that's when we see the big move and the demand of course is created number five by news so I've programmed my scanners to look for all of these in real time so this stock as it's moving High higher right now right now right now is going to be as as long as it's up 10% it's in this price range with high volume everything else it's going to start hitting my scanners that's the scanner that we see right here that CZ c yeah CZ was hitting earlier today okay so the scanners are firing the price is moving up so now I pull up the chart and let's say for the sake of argument that what we're looking at right now is a on minute chart it's a one minute chart the price is squeezing up instantly okay so now I've pulled up the chart I'm looking at the chart forming and I'm thinking I want to buy this but I know that if I buy it right here while it could go higher I could also be buying at the tippy top and it could come all the way back down to where it started now since it where it started is way down here gosh I can't buy it here and stop out down here that would be a rookie move so I need to wait patiently for the first pullback one of the things that I will tell you is that the ultimate test of a skilled Trader is your ability to have the discipline to be patient being patient is hard we all want to trade we want to be trading we want to be making money but sometimes the best thing you can do is sit and wait wait for that opportunity to come to you and when it comes boom you hit so one of the things that I've kind of learned about trading is that one of the biggest challenges for a lot of beginner Traders is having a high quality standard in a in variably most beginners they don't have enough experience or educated intuition to have really good accuracy but they also haven't trained themselves to be disciplined so they end up just trading a lot of things that are moving and the result is poor accuracy possibly even less than 50% and when you're trading with low accuracy you're going to catch some big losers and so when you have big losers now your average winners and your average losers well your average losers might be bigger if you have big losers and you have low accuracy you're a losing Trader so the way to turn this around is to focus first on accuracy by focusing on these types of patterns number one first and foremost trade the best stocks and trade the best patterns if you do that you're reducing your risk your accuracy will improve your profit loss ratio will improve your confidence will improve and this can be the beginning of turning the corner now hey by the way if you haven't already hit the Subscribe button and hit the thumbs up on this episode I hope you do it because this is something that I really think is going to help you in your trading I wish I had had something like this for me when I was getting started okay so back to the Whiteboard so we have this move higher but I'm being patient I'm holding my hands I'm doing my deep breathing I'm saying I have to wait I have to wait for a good setup so this is the pattern that I'm going to wait for I'm going to see a couple of candles going up it could be one big candle it could be three or four but what I'm going to wait for is the first candle that goes red so as it's going red right here this is the first moment where we're seeing some profit taking some Traders are selling maybe it was traders who were in before the news maybe it was some traders that jumped on in this area maybe it's some short sellers it doesn't really matter but for whatever reason we're seeing some selling there are a couple of things that I'm going to watch I'm going to erase this here just for a moment we'll remember that there was news here and I'm now going to fill out the volume profile the volume profile is telling us the number of shares that were traded in each one of these candlesticks as the price went higher move this one a little bit closer so what I usually like to see is increasing volume as the price is moving up so if we look at CZ here yes indeed we do see a bit of a red flag what do you notice right here relatively light volume on these green candles here and here and high volume on the red candle candle a high volume red candle where in this case it went from a high of 774 all the way back down to 668 that is not what I want to see I'd like to see something a little bit more like let's look back at Reddit the other day I want to see something where the price is going up and the volume is increasing I want to see high volume on green candles light volume on red candles this would be fine high volume on green candles light volume on red candles that means there's more buying than there is selling that's what we want to see now if we look at this as it continues after hours for the most part pretty high volume buying a little higher volume on the sell side here but then it gets lighter it comes back up but then a little bit higher here so you can see here that we're starting to get a little bit more selling as we get higher into the move and the move is not able to hold as it turns out it comes back down so what I want to see is light volume and volume increasing but I would not want to see something like a high volume red candle here this would tell me that either people are shorting it or just too many people are selling and I don't like it I would always prefer to see the volume on this candle is lighter than the volume of the previous green candle this is a good volume profile so without the volume profile we're kind of blind because although we see these candles we don't really know what the makeup is we don't know how many shares were behind each one of these candles so again this would be trading without all the relevant information now we get more information we're more equipped to make a better decision so typically I like to see longbody green candles a small red candle that's not bigger than previous candles and it's okay if there's two I would say however if there's three if there's four well now this is starting to not look so good this is not the perfect pattern I would say as a rule of thumb I never want to see the price retrace more than 50% of the move so if this is the first leg up the most it can retrace is 50% more than that the pattern's broken but I don't even really want to see it retrace more than 75% if I'm going to be honest I'd rather see it hovering here in the top 25% of the move I want this to really be showing some serious strength and then this is what I'm going to do I'm going to see it squeezing up I'm going to see a couple candles of pull back right here and then what I'm going to be watching very closely is the actual order flow the way I read the orderflow is actually not on the Candlestick chart but on the level two so the level two is also called the depth of the market this shows us every single buy order and every single sell order that's been prepared for the stock and it shows us the time in sales where we see every single individual order that goes through I'm going to show you a live example in just a moment so don't you worry so what we look for is the move up the pullback and then what I look for on the time in sales so this is the time and sales window right here and I'm going to look for green orders to start going through when green orders are going through that means the price is starting to move up so I don't need to wait for this candle to actually close once I see green orders coming in that's when I initiate my buy order so now here this is the spot right there where I'm in now maybe I'm in a little bit lower but I'm in right around this area here and my Max loss on this trade is now the low of this pullback so my Max loss initially was well the low of this whole move so by waiting for this pullback I was able to move my Max loss from down here to right here I moved my Max loss up a ton now this is called risk I'm managing my risk so if this is my entry and that's my stop let's say for instance that's 10 cents a share let's just say for the sake of argument that I got in this at $6.60 and my stop is 650 my target on this most likely would be seven and I'll explain that more in just a moment so on this I would look for then continuation higher and then move up to the next level now a stock that's very strong that has great news is typically going to give us not just one solid pullback typically we'll have another one up here and by the time this one's happening I'm already green on the trade I could be holding my whole position or I could take a little profit off the table as it moves higher or I could take profit when I see the first red candle and then I can add back right here and I'll do this all the time and if we look at this example on Reddit it shows you why it's okay to trade like that so some people would say oh gosh Ross I I couldn't possibly buy this back and I'll just show you I'll just draw this out so let's just say someone bought it right down here they they got in at this pullback here which not Picture Perfect not a picture perfect pullback but it's not bad the price goes up here You've Got 2 4 6 8 10 green candles in a row and then you've got two red candles a small green candle another red candle so this would have given you a little bit of a false start and then it kind of goes lower kind of pops up also worth noting this is a 5 minute chart whereas really focusing on a one minute for this pattern I'm showing you but it's okay so we get this move higher we get the pullback so let's just say someone got in here at $56 right there it goes up to 61 and they get out then it pulls back some people say gosh I can't possibly get back in you know here or here at $61 a share I was just in a 56 and I would say why not it's a great pattern this pattern is called an A B C D pattern it also looks like a w here and this is a pattern that we'll trade all the time now it's not my favorite pattern but it's a decent pattern the reason it's not my favorite is cu it fails on the first attempt pulls back and it goes on the second so it requires a failure now I don't really like patterns that you know fail first I'd rather have them work initially and from the beginning but in any case so it goes higher and then here we have another one right here so I'll just keep trading these I'll keep trading them I'll keep trading them until the pattern breaks down so like right here the pattern it starts to break down and what do we notice here well this was our previous low right here that was our previous low so if I pull up uh this drawing tool I'll just click that out so this is our previous low we always want to see that we hold we move higher we hold we move higher we hold we move higher we want to be stair stepping higher it should look like a a set of stairs but here when we come back down and we actually break the low of this last pivot at that point we know it's over now I wouldn't have been a buyer down here anyways because we don't have the green and this is a big red candle this candle communicates to much weakness so this pattern already would have been telling me to stay away to not even touch it and that's because I've learned to recognize the signs of weakness in these candlesticks okay so this pattern that I'm showing you right now this is what I would call a micro pullback and a variation of this so there's I two there's two names for it um in the context of a 10c sorry 10 second or a one minute time frame this is called a micro pullback so a micro pullback is when a stock is super super strong it squeezes up and this is a 10-second chart it only pulls back for a moment before surging higher so number one micro pullback this is number one the second Vari ation of this is called a bull flag a bull flag occurs when you have this time frame this pattern accept it's on either a one minute or more likely a five minute or or even it could be on a daily chart you could have this on a daily chart and it would still be a pattern that you would want to watch however on a daily chart you're typically not going to have as good a resolution unless you have news that comes out on each individual day so on an intraday time frame this is going to be really best so the focus here is intraday trading so 5 minute 15 minute this is a bull Fleck now I actually will put a link I'll pin it to the comments very top of the comments and I'll put it in the description it's a link to download my micro pullback strategy PDF so this a PDF you can download you can print it out you can put it next to your desk pin it to the wall and it's going to give you bullet points action points of exactly how I trade this as a strategy because a pattern well it's it's just a pattern a strategy is the whole set of rules of how to trade it the time of day I traded the type of stocks I traded on and it goes into a lot more detail so if you want to keep learning make sure you check that out it'll be pinned in the top of the description and uh top of the comments okay so micro pullback or bull flag depending on the time frame so this is going to be 5 minutes and uh higher so anything five minutes and up I would call that pattern a bull flag 10c time frame or 1 minute time frame this is going to be be uh a micro pullback so now let me show you an actual real money example of a micro pullback okay are you guys ready this is going to happen quick all right so this is my small account as many of you know I've been doing a small account challenge even though I've made more than $10 million of verified and audited trading profits I like doing these small accounts because it's a challenge and it's kind of fun and you guys on YouTube really enjoy it so anyways I've got this small account challenge that I've been doing I funded the count um let's see well the the balance on this day is uh $1,181 45 okay so this is a super small account all right so this keeps it real this is being very relatable anyone probably almost anyone could have a 500,000 account all right so this stock um has just started to move up my scanners the name of the stock is GX AI so I type in the symbol GX first step and we're we're going to break this down like second by second to what's happening so GX is up 21% right now and it just hit my scanners it's starting to move up the scan I pull up the chart the chart's starting to load here we've got the 1 minute the 5 minute the daily and 10sec are still loading and what we see is that the stock just squeezed from 560 up to about 660 that's almost a dollar a share it's a very quick move now what I also know about this is that this is a stock that recently made a huge move so when I see it popping up I'm thinking all right I already know this is a stock that has a potential to squeeze I want to be jumping in it fast okay so the first thing I do is I press shift one so look at this I press shift one and it puts in 1,23 shares the reason it does that is because I press the buy button to use 95% of my buying power now some of you would say Ross wait a second I thought with small accounts you should only risk you know like 3 to 5% on one trade okay I don't really follow that rule when it comes to trading in a small account also I would say that when I'm taking a position using 95% of my buying power I'm not risking 95% of my account my risk is the difference between my entry and my Max loss it's the same with trading Forex with Forex you trade on Leverage 100 times leverage and the reason you do that is because the underlying moves in these currencies are very small so you need to use leverage in order to make a good return all right so realistically on this I'm risking about $300 I just got in the trade and I'm down about $276 on the bid so maybe I'm see more like 400 if it drops I'm going to stop out and sell immediately now this isn't necessarily to spend this episode getting into the Nuance of uh order entry and hot keys and things like that uh but just to say that's how I got into the trade all right so the reason I got in here is because the stock is right under a half doll and I have a feeling that what we're seeing right here is a micro pullback okay so see this green on the tape right here this is the green that I was talking about when I see that green that tells me other people are buying this other people like this setup and that means I'm going to like it too right so in in other words the light has turned green so to speak traffic is already starting to flow I already see other people are buying so that's giving me confidence that the light is in fact green on this stock and I should press the buy button too so that's what I'm going to do I press the buy button and just like that we see the offer pop up to 669 it goes up to 670 now this candle is green we're back at the high of day so you can see right now in the one minute all we have is one big longbody candle the five minute is the same one big longbody candle okay but on the 10sec we see the pop up the pullback and this is where I bought now this is not the exact Picture Perfect micro pullback because um it happened very very quickly there are two red candles and one of them is on slightly higher volume right here but it happened very quickly and the price was sort of holding and that's something I really look for especially at the very beginning of a move like this so I see more green going through on the level two I'm just going to resume it just for moments it dips back down to 625 by 641 it's back up to 666 676 685 and then all of a sudden it jumps to 720 it jumps over seven and goes to 720 now watch this 688 x717 $7 on the bid holy smoke 750 on the offer so I'm in at 648 now remember how much money this account had in it this has $1,181 in it I'm currently up $419 in unrealized profit watch as this pushes a little higher right here I I think this is where I'm going to take some profit I saw a little bit of selling there and I decided to join and take a little profit off the table I sold half of my position now we've got 725 by 750 750 is on the offer back to seven on the bid 725 on the offer 765 and what you're going to see is this starts to pull away right now it's up 40% and you know what it's doing right now it's actually doing the the same thing it just did before at 650 so it came up to 750 and now it's doing a little bit of a pullback what do you think is going to happen if it break 750 what would you guess what do you think the next area of resistance would be that's the real question I would wager that the next area resistance will be at the next half dollar whole dollar because what I know is that these stocks and this is very true um in the stock market will show respect at half dollars and whole dollars so I'm just going to draw this out here for a second uh the reason this happens is because a lot of people put orders to take profit at half dollar and whole dollars they're just very memorable you're like oh I'll sell it I don't know six 650 7 7508 850 and so what we see is that the stocks will squeeze up green candle green candle it'll pull back for since around 650 it dips for a second and then it pushes higher it breaks through it it squeezes up to the next level you know 6 650 pull back here and then a push up to this next level like this this is very common that we stair step around these levels so as we watch this price action it's really respecting um that philosophy it's coming up to around a half dollar and then all of a sudden it breaks through it and when it breaks through it where does it go it goes up to $8 almost immediately there's $850 it goes up to the next half dollar look at how it jumps from 8 to 850 so there aren't really in this case a lot of sellers between 8 and 850 there sellers at 8 and then there's sellers at 850 and now there's buyers at 8 so now you go up all the way to 850 now I take a little more profit off the table as it pushes higher I'm now up 754 $43 on this stock it's up 50% on the day it has news and so what we see is that we've got this first move higher micro pullback second leg up micro pullback third leg up right here so our last high was about what was it um 850 or so something like that now we've got a little bit of a warning here on the one minute chart because we have a dogee candle do you see this dogee that means the open and the close are about the same in this case even in spite of that it pushes higher I'm not confident to add back even though the 10-second chart looks okay and it's another micro pullback I don't add back because the one minute is giving me a little bit of a conflicting signal and sometimes that'll happen what this means is that we do not have multi-timeframe alignment multi-time Frame Alignment is when the one minute looks good the 5 minute looks good and the 10sec looks good when all time frames look good we have multi-time Frame Alignment in this case we don't really have it but the price is going higher so we go up to look 875 875 885 we're coming up towards $9 a share this is showing some serious strength and so there are no doubt a lot of Traders out there now we're up to 9 9 9:15 there are a lot of Traders out there who are watching this who are like okay I've got to get a piece of this action I've got to get a piece of the action okay well where do you buy where's your safe entry pullback pullback pullback look at where we have volume volume volume volume people are buying at these levels this is what confirms that this is a universal language other people are recognizing these same areas these are the places to buy so what I want you to do is to download my micro pullback strategy PDF and print out these examples just like this take screenshot of this print out the strategy and start studying it because if I was only going to trade one chart pattern for the rest of my life this is the pattern I would trade it's the micro pullback the whole idea of this pattern and I finally took the rest of it off the table right up there locking up $896 199 and I did that on an account with $1,181 the whole concept here is that we've got something that's moving something that's trending higher and we know we want to buy buy it right so some of these more complex patterns that you'll hear Traders talk about um you've got head and shoulders patterns where you have this kind of move up and then it it sort of you know pulls back for a second does like a little bit of a double top comes back up like this and then it'll pull back down like this pull back down this is a head and shoulders pattern so you've got shoulder head shoulder and a little smiley face right there you've got inverted Head and Shoulder patterns where you know the price dropped it goes sideways it comes back up but the fact is let's not over complicate this we're looking for something that is trending up and what we want to do is we want to buy on the pullbacks it's as simple as that so if we can stay focused on just looking for these nice pullback entries just like that that's where you're going to find the most success now one of the things I really want to emphasize is that a big element of risk management in trading is by choosing the strongest instruments to trade so if you're in Forex you're in crypto it's choosing the right currency and the right currency pairs if you're in Futures it's trading choosing the right Commodities and if you're in stocks it's trading the stocks that have a catalyst the stocks that have a reason to move now certainly we'll find trending markets at times that are just trending because the overall Market is strong but the best trades are going to be the ones where there's a catalyst behind behind the move cuz that's what's going to bring in the momentum that's what's going to bring in the buyers now as you could tell I'm excited about this cuz I love trading I've been doing this for more than a decade and if you want to keep learning here's a a recommended reading this is a book called The Candlestick course by Steve NES you can find it on Amazon this SK goes into a ton of detail about um different Candlestick patterns to be honest it goes into a bit more detail than I think is necessary because I want to keep it simple but I promise you some recommended readings so this is a book that I would definitely check out there's also a nice little book right here how to day trade the plain truth this is another book quit by Annie Duke this is another good one thinking in bets by Annie Duke here's a great one trade mindfully this is another one Thinking Fast and Slow we've got another book here little book of Market Wizards we've got dark Pools by Scott Patterson and we've got secrets of the so's Bandits that is some recommended reading if you enjoyed this episode do me a favor hit that Thumbs Up And subscribe to the channel for more episodes on trading strategy just like [Music] this
