Profit From Volatile
Markets
Using Candlestick Charts
Louise Bedford
Is the chart actually volatile?
Ways of Measuring...
• Guess?
• Peak to trough drawdown?
• ROC?
• ATR?
• ATR%?
Volatility is not Trend...
If your answer is
‘Yes it is volatile’,
then what do you do?
Risk Seeking
vs
Risk Averse
Actions...
• Longer term traders widen trailing
stops.
• Consider shorter term trading.
• Look to implement windfall profit
stops.
• Watch your mindset.
Windfall Profit Example
Exit 1/3 as share shot
up 4 ATR from close of
previous highest high
Previous highest close
(see how share price
drops after this)
A Bar Chart A Line Chart
A Candlestick Chart
Green/White Candlesticks
High
Upper
Shadow
Close
Real
= Body
Open
Lower
Shadow
Low
Red/Black Candlesticks
High
Upper
Shadow
Open
Real
= Body
Close
Lower
Shadow
Low
Set-Up Conditions
A general environment of conditions that suggest the
share is trending. This includes the study of macro
patterns such as double tops and bottoms etc.
The Line family
The Moving Average family
The Momentum family
The Volume family
The Pattern family
Triggers
A specific entry signal to guide you into engaging
the market and opening a position. There are
several key candlestick triggers you can use to
open a position.
Candlestick Trading Will Not…
• Compensate for a lack of capital.
• Make you rich overnight.
• Overcome poor psychology.
Candlestick Trading Will…
• Finetune your entry methods.
• Give you specific triggers.
Indecision
Small Bodies after a Significant Move
Decision
Candle opens and closes at
extremes of price action
Long if low volume, Dominant if
high relative volume
or High impact if a shaven candle
pushes through support or
resistance on heavy volume
These are known as shaven or
marubozu candles
Rejection
Bullish Rejection: Bearish Rejection:
Long Lower Tails Long Upper Tails
Shooting Star
• Tail is at least two times
length of body
• Gaps increase intensity of
signal
• Either colour, but red is
more bearish
Bullish Breakouts
Breakouts are characterised by a continuation of
an existing uptrend, initiated by a green/white
candle typically on heavy volume.
Entry
Entry
Bearish Breakouts
A continuation pattern of an existing downtrend
where a break past support is initiated by a
red/black candle.
Entry
Entry
Bullish Retracements
Trigger into a long position on a bottom
candlestick reversal pattern during an
existing uptrend.
Entry
Entry
Bearish Retracements
Trigger into a short position on a top candlestick
reversal pattern during an existing downtrend.
Entry
Entry
Bullish Breakouts
Bearish Breakouts
NB – importance
of reversals Stage 3 - Top
during trend...
Stage 2 -
Uptrend
Stage 4 -
Downtrend
Stage 1 -
Base
Common High Probability Patterns
Top Reversals Bottom Reversals
Shooting Stars Hammers
Doji Doji
Bearish Engulfing Bullish Engulfing
Patterns Patterns
Dark Cloud Cover Piercing Patterns
The Dominant Candle
Be aware of support and resistance within a
dominant candle.
Top
Mid-point
Base
The Inverted Piercing Pattern
• Bottom Reversal
pattern
• Bullish Candle starts at
50% or > of the bearish
candle and closes
above its real body
• Especially significant
along support levels
The Inverted Piercing Pattern – Candle Addition
The Inverted Dark Cloud Cover
• Top Reversal pattern
• Second candle begins
at approximately the
midpoint of the first and
closes below its real
body
The Inverted Dark Cloud Cover – Candle Addition
New Money Pattern
• A breakout exceeds
Breakout with resistance on heavy
an immediate
rejection
relative volume
pattern preceded with a
rejection pattern which
acts as a buy signal
• Set stop just under
resistance line
Emotional Distance
Joy
Amateur Professional
Despair
An expert trader displays complete detachment when
opening or closing a position.
Bliss – Smooth Your
Personal Volatility.
hobby
Passion Skill
BLISS
imposter zombie
syndrome zone
Money
The Bliss Zone
Aim of the Mentor Program
Every
Instrument
Aim of the Mentor Program
Every
Time Frame
Aim of the Mentor Program
Your
Trading Plan
Audit Results
“…the Mentor Program Trading System is
profitable over a range of
market conditions…
The profitability was confirmed by
back-testing analysis which showed
the system to be robust and profitable.”
Download your Free
Trading Plan Template
[Link]