What are
CANDLESTICKS
And
How To Use Them
The bar at the top or bottom of
a candle can be referred to as a
shadow or wick
Candlesticks can be
used:
On any time frame, one day,
one hour, 30-minutes etc.
Candlesticks can be
used:
On any time frame, one day,
one hour, 30-minutes etc.
To describe the price action
during a given time frame.
There are many
candlestick patterns
but for the most part
they can be grouped
into 6 major patterns
Sometimes it is
hard to determine
what each candle
stick formation is
trying to tell you
The recommendation form
all the candle stick
instruction we have seen
is:
Always confirm the candle
stick patterns with other
indicators.
What is the highest probability
direction of the market.
Each Candle gives us reason to ask
Is this a
continuation or a
reversal pattern?
6 Most common:
Candle Sticks Patterns:
6 Most common:
Candle Sticks Patterns:
1. Doji Candles
6 Most common:
Candle Sticks Patterns:
1. Doji Candles
2. Near Doji Group (tail longer than
the body)
6 Most common:
Candle Sticks Patterns:
1. Doji Candles
2. Near Doji Group (tail longer than
the body)
3. Engulfing Candles
6 Most common:
Candle Sticks Patterns:
1. Doji Candles
2. Near Doji Group (tail longer than
the body)
3. Engulfing Candles
4. Tweezer Candles
6 Most common:
Candle Sticks Patterns:
1. Doji Candles
2. Near Doji Group (tail longer than
the body)
3. Engulfing Candles
4. Tweezer Candles
5. Inside Candles
6 Most common:
Candle Sticks Patterns:
1. Doji Candles
2. Near Doji Group (tail longer than
the body)
3. Engulfing Candles
4. Tweezer Candles
5. Inside Candles
6. Outside Candles
Doji
Doji is a candle without a
body just a tail
It opens and closes near the
same place
Near Doji Group
Where the wick is longer
than the body
They look the same but are positioned
in among the other candles differently
Recognition Criteria:
The long shadow or wick is about
two or three times the size of the real
body.
Little or no upper shadow or wick.
The real body is in the upper third of the
trading range.
The color of the real body is not
important. though a white body is more
bullish than a black body.
The hammer is a bullish reversal pattern
that forms during a downtrend.
Just because you see a hammer form in a
downtrend doesn't mean you automatically
place a buy order!
You need to have more bullish confirmation
before it's safe to pull the trigger.
The hang man is bearish where the
hammer is bullish
An example of
confirmation would be:
to wait for a white candlestick to
close above the open to the
right side of the hammer. And or
check for the 5 alarm trade
The Hammer and
Hang man
should give you heads up
that the market is slowing
and my be setting up for a
reversal
Almost always goes in the
direction if opens on opposite
side of wick
Tails usually represent a
reversal accept when the
reversal covers the tail.
Inverted Hammer or
Shovel
Inverted Hammer
Shovel
Inverted Hammer
Shovel
The inverted hammer occurs when price has
been falling suggests the possibility of a
reversal. Its long upper shadow shows that
price was trying to go higher suggesting a
slow down of the current direction with a
reversal potential.
The opposite is true for the shovel
ENGULFING CANDLES
We only look at the bodies to determine
Engulfing candles. It is where the body of
the current candle completely swallows
the body of the previous candles
Bullish engulfing usually means reversal
to the up side
The bullish engulfing pattern is a two
candle stick pattern that signals a strong
up move may be coming. It happens
when a bearish candle is immediately
followed by a larger bullish candle.
We only look at the bodies to
determine Engulfing candles. It
is where the body of the current
candle completely swallows the
body of the previous candles
Bearish engulfing usually means
reversal to the down side
The bearish engulfing pattern is the
opposite of the bullish pattern. This
type of pattern occurs when bullish
candle is immediately followed by a
bearish candle that completely
"engulfs" it. This means that a
strong move down could happen.
An engulfing candle is
more significant if it
happens
near
a
support
level.
It is even more
significant if it hits near
another high or low
Tweezer Bottoms and Tops
Tweezer Bottoms and Tops
The tweezers are dual
candlestick reversal patterns.
This type of candlestick pattern
could usually be spotted after
an extended up trend or
downtrend, giving heads up that
a reversal may happen soon.
One of the most often
misunderstood pattern
One of the most often
misunderstood pattern
Does not matter if there is a wick
or not. It is the position of the
bodies next to each other
One of the most often
misunderstood pattern
Does not matter if there is a wick
or not. It is the position of the
bodies next to each other
It is a reversal pattern
One of the most often misunderstood
pattern
Does not matter if there is a wick or not. It
is the position of the bodies next to each
other
It is a reversal pattern
Patterns are a foot print of what has come
before
The most effective tweezers
have the following
characteristics:
The first candle is the same as the overall
trend. If price is moving up, then the first
candle should be bullish.
The most effective tweezers have
the following characteristics:
The first candle is the same as the overall trend.
If price is moving up, then the first candle should
be bullish.
The second candle is opposite the overall trend.
If price is moving up, then the second candle
should be bearish.
The most effective tweezers have the
following characteristics:
The first candle is the same as the overall trend. If price
is moving up, then the first candle should be bullish.
The second candle is opposite the overall trend. If price
is moving up, then the second candle should be bearish.
The shadows of the candles should be of equal length.
Tweezer tops should have the same highs, while tweezer
bottoms should have the same lows.
Inside Candles
Inside candle usually means you
are going to move against the
grain. Inside means it opens inside
the body of the previous candle
The inside up candlestick formation is
a trend-reversal pattern that is found
at the bottom of a downtrend. It
indicates that the downtrend is
possibly over and that a new uptrend
has started.
The inside up candlestick formation is a
trend-reversal pattern that is found at the
bottom of a downtrend. It indicates that
the downtrend is possibly over and that a
new uptrend has started.
Conversely, the inside down candlestick
formation is found at the top of an uptrend.
It means that the uptrend is possibly over
and that a new downtrend has started.
Outside Candles Up
Outside Candles
Down
Down
Outside candle is where you open
outside the prior body and that usually
means you are going to continue in that
direction up or down
Outside Candles Up
Outside Candles
Down
Down
Outside candle is where you open outside
the prior body and that usually means you
are going to continue in that direction up or
down
Outside candle trend continuation
The outside up candle pattern is formed
when the long bullish candles follow a
downtrend, signaling a reversal has
occurred. This type of candlestick pattern
is considered as one of the strongest
reversal patterns, especially when it
occurs after an extended downtrend and a
short period of consolidation.
The inside down candle pattern if just
the opposite of the up candle
There are several
patterns that tell you the
same thing
for example is the market:
Continuing
Reversing
Undecided
6 Most Common Candlestick
patterns:
1. Doji Candles
2. Near Doji Group (tail longer than
the body)
3. Engulfing Candles
4. Tweezer Candles
5. Inside Candles
6. Outside Candles
6 Most
Common
Candlestick
Patterns:
Indecision Candle, No body
Doji Candles
6 Most
Common
Candlestick
Patterns:
Indecision Candle, No body
Doji Candles
Suggest direction change or at least a
slowdown depending
on where it is in the trend.
Near Doji Group (tail longer than the body)
Hammer,
Shovel
Hang man
Spinning top
Pin bar
Engulfing Candles
Tweezer Candles
Inside Candles
6 Most Common
Candlestick
Patterns:
Indecision Candle, No body
Doji Candles
Suggest direction change or at least a slowdown
depending
on where it is in the trend.
Near Doji Group (tail longer than the body)
Hammer,
Shovel
Hang man
Spinning top
Pin bar
Engulfing Candles
Tweezer Candles
Inside Candles
Continuation
Outside Candles
Now a little bit on:
Price Action
It is shown by
Candles
The difference
between Price action
and candles is:
Price Action adds in
support and resistance
levels
The difference between
Price action and candles
is:
Price Action adds in support
and resistance levels
Prior highs and lows and
maybe a couple of moving
averages
Candle sticks are part
of price action
whether you are bouncing or
breaking support and resistance
levels
Candlesticks are the rest of the
Price Action decision making process
When you're near support
and resistance levels:
You look for candlestick pattern to
determine the price action
Also look for 5 alarm trades after
grading the strength of the trade
Price Action is the
information you are getting
and the location at which it
is happening:
For example
Is the information coming near,
above, or below Support and
Resistance?
It is our opinion that you
need more than Candlesticks, and
Price Action to take advantage of
the biggest part of a trend.
Grading the Trade and having
profit targets in mind will give you
a bigger edge.
Additional Suggestions:
If you are struggling with
consistency try a higher time
frame
Additional Suggestions:
If you are struggling with
consistency try a higher time frame
It is better to go from the larger
time frames to the smaller time
frames. You dont miss anything
which is contrary to popular belief.
From 1hr to 30 min etc.
It is recommended to only
make decision when a candle
closes or at the opening of a
new candle rather than in the
middle of the formation
It is recommended to only make
decision when a candle closes or at
the opening of a new candle rather
than in the middle of the formation
WE ARE GOING TO SHOW YOU
A TECHNIQUE OF HOW TO GET
HEADS UP AS TO WHAT A
CANDLE WILL LOOK LIKE IN THE
MIDDLE OF THE FORMATON.
Here is the Key:
Look at a smaller time frame to get
heads up
i.e.
Day to 4hr
4hr to 1hr
1hr to 30 min
30 min to 15 min
If you cant determine
what a candle stick
pattern is telling you
look at other time
frames
If you cant determine what a
candle stick pattern is telling
you
look at other time
frames
Check other indicators
for conformation
If you cant determine what a
candle stick pattern is telling
you
look at other time frames
Check other indicators for
conformation
Check back later when the
chart is easier to read.
It is about quality not
quantity
what about both!!!
It is about quality not
quantity what about both!!!
With each new candle you are
attempting to answer the
question continuation or
reversal
You do not have to
know every pattern
to be able to use
Candle Stick
patterns
The study of
Candle Stick
Patterns is:
A long term
endeavor
Lets look at
some charts for
Candle stick
Patterns
Now just a little on
the
CANDY BAR
SET UP
The Candy Bar is one of
the safest trade you can
take
The Candy Bar is one of
the safest trade you can
take
It is usually confirmed by
one or more other
indicators
The Candy Bar is one of the
safest trade you can take
It is usually confirmed by one
or more other indicators
The trade will be earlier than
most other entry signals in a
continuing trend
Lets look at
some charts
For Candy Bar
setups
