ULTIMATE Candlestick Patterns Trading Strategy (Two Candlestick Patterns That Saved My Trading...)

the first thing I did when I started trading was memorize every single Candlestick pattern and it was a massive waste of time because I was still losing money but after about six months of testing trading and optimizing I realized there were two Candlestick patterns that stood out Above the Rest and that these two Candlestick patterns were accounting for ninety percent of the profits I was making in my trading these two Candlestick patterns performed so well that they're still the only two Candlestick patterns I use in my trading today so in this video what I want to do is show you these two Candlestick patterns show you the objective way I have of identifying them so there's no confusion when I'm looking for them on a chart and I'm gonna explain a full systematic strategy that utilizes these two Candlestick patterns and that I think can jump start your profitable trading career so if that sounds good go ahead and click that like button for me go ahead and subscribe if you're new and I'll see you on the other side of the intro and disclaimer foreign [Music] welcome back and first off what is the problem with trying to memorize every single Candlestick pattern well for starters you're going to be overwhelmed if you try to do that and number two the reason I was doing that and memorizing every Candlestick pattern is because I truly believed I was going to find some magical Candlestick pattern that would win 80 to 100 of the time by itself when the truth is that something like that does not exist instead the way you need to see Candlestick patterns is as a small piece to a much larger puzzle your trading strategy is that full puzzle the Candlestick pattern that you choose to use is just a small piece of that so what I would recommend is try to find a Candlestick pattern or a couple of Candlestick patterns that work best for you and then incorporate that into an overall strategy which is the entire process we're going to get into right now starting with me showing you the two Candlestick patterns that perform the best for me for any of you who have studied Candlestick patterns or for most of you who have viewed archive content this is going to be review so I'm going to go through this rather quickly essentially my two favorite Candlestick patterns are the bullish and bearish engulfing pattern and the hammer slash shooting star pattern now I'm going to go over my objective rules for spotting these patterns with you so for a bullish engulfing pattern it's super simple we're looking for a red candle followed by a green candle in which the green candle has a larger body than the red candle that's a very easy way to define an engulfing candle and in the Forex Market the close of the previous candle is going to be exactly where the next candle opens a majority of the time which is why I'm not saying that we need a lower open on this engulfing pattern that may be something you've read about but for a bearish engulfing pattern we're looking at exactly the opposite we would look for a green candle followed by a red candle that has a larger body than the green candle that would be our bearish engulfing pattern now as for the hammer and shooting star I have a very specific way that I spot these patterns to make it objective so I'm never confused about like asking myself is this a hammer or is it not a hammer is this a shooting star or not a shooting star and that way is by using a Fibonacci retracement and I just pull from the low of the wick to the high of the wick and I want to ensure that the entire body of the candle is above the 38.2 retracement as long as that is met and as long as that is true I have a valid Hammer candle and then also for a shooting star it's exactly the opposite I'm pulling a Fibonacci retracement from the high of the candle down to the low of the candle as long as the entire body of the candle is below the 38.2 percent retracement I have what I consider a valid shooting star the color of these candles does not matter this could be green and this could be red now that you have my two favorite Candlestick patterns and the objective rules I use to identify them let's move on and talk about a systematic strategy that utilizes these two Candlestick patterns plus other confluences in a strategy that I think can help kick-start your profitable Trading career one of the key components to a successful trading strategy is that you have rules for every aspect of that strategy this strategy specifically is going to be a trained continuation strategy so the first rule we're going to talk about is our Trend rule for Trend we're gonna be using the 20 EMA and the 50 EMA when the 20 EMA which is my red line is above the 50 EMA which is my blue line we're going to consider that an uptrend and be looking for buying opportunities and the opposite is true as well we're also going to be combining Trend with areas of value as you can see right here we have our areas of value the first area of value we're going to be using is the moving averages themselves which can oftentimes act as support or resistance depending on the direction the market is moving the second area of value we're going to be using is the stochastics indicator and we're going to be looking for extremes on the stochastics indicator an extreme for the stochastic indicator can be seen at the 20 line and at the 80 line if this blue line is above the 80 line then we're in an extreme over ball area if the Blue Line's below the 20 on the stochastics indicator we're in oversold territory will be looking for we'll be looking for buy trades and oversold and sell trades in overall the third area of value that we can look for is support or resistance within 100 candles looking left now if you look beside areas of value you can see that we need at least two out of three of these to occur so we're gonna be looking for at least two out of three of our areas of value to occur while price is also in Trend defined by our 20 and 50 EMA and then you already know the entries we have which are the two we've discussed throughout the video already the bullish and bearish engulfing bars along with the hammer and shooting star bars stops to keep things simple are going to be One X ATR the ATR indicator is right up here it can be found on most trading platforms and it measures the volatility of the market by giving you the ad average movement of the last 14 candles so we're going to be using the ATR below the entry candle we're going to be going one times the ATR indicator below and above the entry candle depending on the direction that we're trading targets are going to be a 1.4 to 1 reward to risk ratio compared to our stop loss for these examples if you want to take a screenshot of this so you can follow along that would be great and essentially the process I'm taking you through in this video is showing you how to build a trading strategy an acronym that I created that has helped a lot of our students in the university is something I call CEST or c e s t if you've been around the channel for a while this is probably review but for those of you who are brand new C stands for the conditions I need to see before I look for a trade conditions would be things like Trend and areas of value e obviously stands for entries that I can take why am I actually going to press the button I don't want to be confused after seeing my conditions met on why I'm actually going to place the trade I need exact rules for why I press the buy button or the sell button s stands for stops I need to know exactly where I'm going to be placing my stop before I enter the trade and T stands for targets I need to know an area that I'm looking to get out of the market if I'm right so in the future if you plan to build strategies use the CEST model in order to ensure that your strategy is rules based and if these rules seem a bit confusing right now no worries I'm gonna go ahead and dive into a few examples so I can help to explain the entire strategy even better for our first example we're staying right here on the dollar Yen for our chart and I'm going to take you through every circumstance that can happen to give us a valid trade so here on the chart starting off with what do we need to do we need to find the trend of the market it's very obvious when we're using the 20 and 50 EMA as long as a 20 EMA is above the 50 EMA we're considering that an uptrend and we're looking for buying opportunities so do we have that here here yes we do we have the red line above the Blue Line what's our next step we're pointing out two out of three of these areas of value that's what we need to see so right now where price is is it coming into an area of value well the 50 EMA can be an area of value so the answer to that question is yes we have one area value the next question we have to ask is is our stochastics indicator at an extreme in this case if we look down here you can see that a blue line did in fact go below our small dotted line which is the 20 mark on our stochastics and if you remember from a little bit earlier if the stochastics line goes below 20 then we have an extreme case so here we not only have our Market in the correct Trend we not only have our two areas of value completed but if we look at step three which is to find an entry I've already pointed this out we actually also have a valid Hammer candle according to our rules our rules are that a hammer candle needs to have the body of the candle above the 38.2 retracement and that's exactly what we do here so this is how we would set that trade up I'm going to delete this and redo it for you to make sure it's easy to understand the close of that candle is where I would be placing my entry as soon as the candle closes after that we look down again our step four is to place our stops our stops are one times the ATR indicator in case that's not clear the ATR indicator is right up here and right now you can see that the ATR is 59 we don't count this last little number it's actually a tick not a pip so we don't count that it's 59 Pips is the ATR so at this point we know 59 Pips is the ATR we want to go that 59 Pips below the wick of this candle so we have 50 down to it that means 109 is going to be our stop loss as we stated before for our step number five that's going to be finding the targets the targets are a 1.4 to 1 reward risk ratio based on that stop loss and it's really easy on trading view you can see that 1.4 right here so that's how our trade setup would look let's see how this trade would have played out as you can see eventually pushing up enough to in fact hit our targets and we're gonna go through a few more examples but hopefully at this point you're starting to see how simple trading can be if you just add rules and steps to your trading we have five steps here that are extremely simple and that still have the ability to give you an edge over the market and to provide profits over a long period of time and just so it's clear this trade was an example of the 50 EMA as an area of value the stochastic Extreme as an area of value and our Hammer candle for our entry let's go ahead and look at example number two let's go ahead and go through the Steps step one find the trend of the market is the 20 below or above the 50 20 is the red line 50 is the Blue Line we're below therefore we're looking for a downtrend or we're looking for sell trades so with that being the case what's our next step find areas of value are we against the 50 EMA again here yes we are we're right up against that 50 EMA and as long as the candle that is the entry candle is still touching the 50 EMA then I count that 50 EMA as an area of value we're not even going to pay attention to those stochastics this time but what I want you to do is pay attention to the next area of value which is a support or resistance level within 100 candles looking left so in this case what I want you to be able to spot is right here we have our previous level of structure support that was broken and this level of support is if I bring out my measuring tool within 100 candles so what I do is just bring out the roller tool and I put it there go this way and wherever this level of structure is which is right here now you can see that that is 46 bars to the left which means it's less than 100 bars right which means we have area value one with the 50 EMA and we have area value 3 with a support or resistance level looking left within 100 candles step three you can already see it I hope we have ourselves a shooting star candle which is our entry so in this case this is what we would do we would scroll into the chart once we saw this candle and then we would go up here find our Fibonacci retracement grab it go from the high to the low as long as that candle is below the body of it is below the 38.2 retracement we have a valid possible entry we go ahead now and place that order at the close of that can handle the ATR is 21 Pips 12 plus 21 is 33 and we're shooting for a 1.4 for these examples let's go ahead now and click play and see how this trade worked out as you can see quickly pushing down to targets obviously it won't happen like that all the time and I'll give you an example of losses in just a second but for now let's move on to the final combination of areas of value we can have to support a good trading opportunity in this example I'm going to show you how I would actually prepare for the trade so in this case step number one is that we need to see price in an uptrend price is it an uptrend win the 20 EMA's above the 50 EMA we know we have that as valid next up we're looking for two areas of value so what I ask myself is what are the possible two areas of value I could see happen during this pullback so as we're pushing higher and price starts to pull back the 20 EMA can act as an area of value the 50 EMA can act as an area of value an extreme stochastic can act as an area of value and a previous level of structure looking left less than 100 candles can act as an area of value so what I would do in this specific case is go ahead and draw out my zone of major structure right here and I would wait to see what price does so now we have to actually move the market forward we're prepared third looking for areas of value we come into not only the 20 EMA are red line but also coming into that previous area of resistance that is within 100 candles I'll show you that now we go left here with our little measuring tool we're only 80 bars back which is within 100 candles next up we get another move into our zone of structure still at that 20 EMA and then we get a big engulfing candle so at this point I want you to go ahead and see if you can spot out what type of trade this would be hopefully you said it's in an uptrend that's pretty obvious hopefully you were also able to say that we have valid rules met for area of value number one and area of value number three because we have price at the 20 EMA along with at a level of previous resistance within 100 candles looking left hopefully you also pointed out that this is a bullish engulfing Bar for our entry let's move on to talk about stops and targets which you should already know by now our stops are going to be one ATR below the entry candle that's our entry candle the ATR is 22 down to the low is 27 27 plus 22 is 49 and looking for a 1.4 to 1 reward to risk ratio on these examples and there we go after playing around a bit we did in fact come up high enough to hit those targets now let's take a look at one more example before we move on to the most important part of this video for our last example prices in what type of trend well the 20 image below the 50 EMA meaning we are in a downtrend looking for bearish trades how are we going to set this up well we're going to look now for our areas of value we can tell that price is at the 50 EMA at the moment we can look for stochastics extremes which by the way we're already in one as we're in the overbought area of the stochastic which is above 80 and we look for a major level of structure within 100 candles if we look left we actually have a level of structure that was just broken right here so this is a level of structure paired with the 50 EMA which is also paired with an extreme stochastic here if we get an entry we have a very high probability setup because we're combining all three areas of value and here we have that entry which is a bearish engulfing bar I'll go ahead and set up stops and targets and this is what we would call the absolutely perfect setup for this trading strategy and as a final example here we have the perfect setup right we have prices pushing higher we have an extreme on our stochastics indicator we get that nice shooting star candle at our 50 EMA while prices are in a downtrend everything looks like it absolutely should work out but it doesn't and this is just a part of trading I wanted to show at least one loss here so you understand that this is not a strategy and no strategy at all is one that wins all the time which actually brings me to my next point if you take the correct next steps and you go back test this strategy or any other strategy what you'll notice is that strategies tend to have times when they perform really well and make a lot of profit and they tend to have times when they perform not so well this is just a very natural part of trading and what tends to separate losing Traders from winning Traders is the winning Traders have the ability to make it through those periods of drawdown when strategies are performing less well and to help explain this further I'm going to draw a diagram for you so imagine with me that we have a Trader and this Trader is newish and has a strategy that breaks even over a long period of time so it doesn't make money it doesn't lose money let's say he starts with a 1K account and he ends with a 1K account let's say this time span is one year and let's say he gets around 100 trades this year but with this being the case what do you think his profits are going to look like in terms of throughout the year what's his Equity curve going to be well as we all know markets are inconsistent they go through periods of no volatility then periods of high volatility they go through periods of consolidation periods of breakouts and trends like we have on dollar and Yen pairs right now so this is what markets actually look like it's very inconsistent so his profits even though he has a strategy that breaks even so figuratively it should go from 1K to 1K his Equity curve isn't going to be linear like a straight line this is what his Equity curve would look like even if he's a break even Trader he would have Toms when he was doing really well times when he did badly times when he kind of broke even and his Equity curve would look like this until the end of a large sample size because of the inconsistencies in the market now this was an example of a Trader that's completely break even and does not have an edge over the market Let's do an example of a Trader that has an edge what would that look like well that would look something like this right we would have a starting point that was lower than the ending point for this Trader that's pretty obvious so let's say this Trader started with a one thousand dollar account and he made a hundred percent in a year he had a crazy good year so he went from 1K to 2K within that year the problem with most Traders is this line is what they expect that Equity curve to look like when in reality the same markets are what we're trading even though we have a strategy that has an edge that's proven to be make money in the past and that's proven to give us profits those profits aren't going to come in a linear straight line because of the inconsistencies in the market this is what those profits would likely look like our path to getting to that 2K or making that 100 is not going to be a straight line and what happens is so many Traders have an issue dealing with these periods of drawdown that push them below that linear line that's our average of what we make throughout the year but in reality with markets being inconsistent and constantly fluctuating we cannot expect our trading to just be a straight line from point A to point B it's going to be more like mountains and valleys that have a slope to the upside if we're trading a profitable strategy and that is just the natural part of trading the faster that you can recognize that and understand it the easier your journey to profitable trading is going to be hopefully that diagram helps you to make sense of what a trading strategy looks like in terms of an equity curve over a long period of time now I want to go back to our rules of this strategy as a quick review for this strategy we're looking for price to be in Trend based on the 20 and the 50 EMA we are then looking for two out of three of the areas of value I have listed here after that we're gonna be looking for an entry our entries are the two Candlestick patterns I've shown you earlier in the video stops for these examples was one times the ATR indicator below and above the entry candle and targets for these examples was a 1.4 to 1 reward to risk ratio feel free to mess around with the stops and targets mess around with any of it you would like turn this strategy into your own but right now I think it's really important for you to understand that a trading strategy does not equal profitable trading if you remember that diagram I was showing you those ups and downs the Peaks and valleys the reason Traders tend to have such a hard time when their Equity curve is doing this is because of one of three reasons they either have really bad risk management that's causing their peaks and valleys to be too extreme and causing emotional turmoil so the first reason for that is going to be risk management another reason Traders get really uncomfortable during this is because they have not back tested their trading strategy so they have no idea if it actually has a positive expectancy over time so these are the ways you can fix those emotional problems you're having so the the second thing if you have a decent risk management plan would be to backtest the trading strategy to give yourself more confidence in it whatever you're trading whether that be the strategy you learned in this video or some separate strategy and another reason that emotional turmoil takes place is because of a lack of knowledge of trading psychology which is just your ability to stick to your plan again the market will test you with drawdowns and valleys and I know all you want to see is Peaks trust me I wish I could tell you that trading was a straight line straight to the sky straight to the Moon if you will but that's not how trading goes and that's the reason 95 percent of people fail is because they're lacking either a strategy that makes money over time a risk management plan that keeps them comfortable and emotionless during their trades or a knowledge of trading psychology and the ability to be disciplined to that strategy and that risk management plan even if they get greedy and want to risk more or even if that strategy isn't working right now because it's going through a period of drawdown switching strategies is not the answer if you have a strategy that's proven to be profitable over time learning how to trade from YouTube is a great first step but if you're ready to take that next step and you want to learn from an organized University style course that'll teach you everything from the basics to extremely Advanced strategies then we do have some space available in the TTC 4X University with the TTC Forex University you'll also be receiving three to five email analysis per week which are trades I'm actually taking based on the strategies you're learning in the course you'll be receiving the Pro Trader report at a best setups video each and every Monday talking about the pairs and structure levels I'm paying attention to personally for possible trades you also receive email coaching support so it'll be me personally answering any emails you have or any questions that you have rather about trading in general or about the course and on top of all that the university also comes with a risk-free money back guarantee so if you're unsatisfied for any reason at all all you have to do is send us an email and I'll make sure my support staff gets you a refund ASAP I don't think you'll need it though so if you're interested in the TTC 4X University and being a part of that we'd love to have you it's the first link in the description and also you can go to www.tdcfxuniversity.com if not that's completely fine too just be sure you're subscribed here by clicking the little red button and the notification Bell be sure to click that like button if you enjoyed the video comment if you made it to the end I'll try to like every comment that says you made it to the end thank you for your dedication to yourself your future and learning how to trade Forex I will talk to you guys in the next video see you soon

Channel: The Trading Channel

Views: 108,681

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: vIPS06FKuJM

Length: 23min 55sec (1435 seconds)

Published: Fri Sep 23 2022