Candlestick Patterns for Trading

Introduction

• Presenter shares personal success in trading with a 10% gain.
• Aim: Teach favorite candlestick patterns for predicting chart direction and becoming a successful trader.

Engulfing Candle

• Definition: A candlestick that engulfs the previous candle.
  • Bullish Engulfing Candle: Opens lower, closes higher than the previous candle.
  • Bearish Engulfing Candle: Opposite of bullish.
• Usage: Indicates possible price reversal.
  • Example: Price at strong support shows a bullish engulfing candle, indicating price will rise.
• Warning: Shouldn’t rely solely on candlestick patterns.
  • Use with support, resistance, indicators, etc.

Momentum Candle

• Definition: A large candle 2-3 times bigger than the previous ones.
  • Indicates strong price movement in a particular direction.
• Usage: Effective in sideways/choppy markets.
  • Example: In a sideways market, a large momentum candle suggests the price will continue in that direction.

Multiple Candlestick Pattern

• Definition: Multiple candles with wicks in the same direction.
  • Indicates strong support/resistance as buyers/sellers repeatedly fight off price movement.
• Usage: Combine with support/resistance levels.
  • Example: Multiple downward wicks at support indicate a potential price rise.
  • Example (short): Upward wicks at resistance suggest a good short entry.

Doji Candle

• Definition: Thin body with wicks on each side, signifies market uncertainty.
  • Variations: Long-legged Doji, Dragonfly (big bottom wick), Gravestone (big upper wick).
• Usage: Signals potential price reversal.
  • Example: After a doji, wait for 2-3 candles to confirm a trend reversal.

Hammer & Shooting Star

• Hammer: Decent size body and long bottom wick, bullish sign indicating a reversal upward.
• Shooting Star: Similar to the hammer but with a small wick on top, indicative of a bearish reversal.

Tweezer

• Definition: Two candles (one red, one green) with similar wicks at the bottom/top.
  • Bullish Tweezer: Red followed by green with bottom wicks.
  • Bearish Tweezer: Green followed by red with top wicks.
• Usage: Indicates potential reversal at support/resistance.
  • Example (bullish): Red candle with bottom wick followed by green at support suggests a price rise.

Marubozu

• Definition: A large candle with no wicks.
  • Bullish Marubozu: Big green rectangle, indicates strong upward trend.
  • Bearish Marubozu: Big red rectangle, indicates strong downward trend.
• Usage: Confirms continuation of current trend direction.
  • Example: Bullish Marubozu in an upward trend suggests continuation.

Bonus Tip

• Automating Candlestick Pattern Identification:
  • Use indicators on Trading View to automatically identify candlestick patterns.
  • Example: Add 'bullish engulfing' indicator to receive alerts when the pattern appears.

Conclusion

• Reminder: Candlestick patterns are not foolproof and can result in false breakouts.
• Additional Learning: Video suggestion on avoiding false breakouts.
• Call to Action: Like the video if it was helpful.