How to Read Candlestick Charts

Overview

• Candlestick charts: universal language of financial markets.
• Applies to Forex, cryptocurrency, futures, stock trading.
• Correct reading reveals subtle buy/sell signals on every chart.
• Over-complication and wrong chart types: common mistakes.

Three Simple Steps to Read Candlestick Charts

Step 1: Fewer Indicators is Better

• Too many indicators lead to conflicting signals and complexity.
• Simpler setups: easier to read and act upon.
• Personal example of overly complex chart with 20+ indicators.
• Key takeaway: Simplify charts to focus on few, effective indicators.

Recommended Indicators

1. Exponential Moving Averages (EMA): 9 (gray), 20 (blue), 200 (magenta)
2. Volume Weighted Average Price (VWAP): Including volume aspect for context
3. Volume Bars: Color-coded (green for up, red for down) based on price close/open
4. MACD (Moving Average Convergence Divergence): Positive when MACD is above signal line

Practical Chart Setup

• Show difference between cluttered and clean chart.
• Importance of colored volume bars and understanding sentiment.
• Trading with minimal indicators for better visibility and pattern recognition.

Step 2: Focus on What is Obvious

• Trade based on what is moving, not on familiarity.
• High relative volume (RelVol): at least 5x the average.
• Not all stocks/futures/commodities/cryptocurrencies are worth trading daily.

Criteria for Trading

1. Look for High Relative Volume (>5x).
2. Price movement: instrument up at least 10%.
3. News catalyst: Drives relative volume and price movement.
4. Price range: Preferred between $2 and $20.

Example

• Use market scanners to identify potential trading stocks...
• WIA as an example: High relative volume, catalyst, and price range.
• Strategy in action: $10,000 profit trading obvious setups.

Step 3: Building a Trading Strategy

Read Candlestick Patterns

• Example: Trading waves and dips in price.
• Buying at first candle to make a new high post-dip.
• Timing entries with MACD and volume profile support.

Managing Trades

• Initial instinct to sell quickly due to fear of loss.
• Importance of holding positions longer to maximize profit (setting stops, scaling out).
• Using Hotkeys and sell scripts to manage and trail stops for better exit strategies.

Identifying Exit Indicators

• Exit when: Price stops moving up, absence of buyers, formation of red candles.
• Exit systematically on valid signals to avoid holding too long or too short.

Conclusion

• Keeping charts simple improves effectiveness.
• Trading 'obvious' high-relVol stocks/instruments boosts profits.
• Build strategy based on metrics showing success.
• Iterative learning and adaptation to improve accuracy and profitability.

Recommended Actions

• Download trading strategy PDF for detailed guidance.
• Practice strategy in a trading simulator.
• Regularly review and refine based on performance metrics.

Next Steps: Download the PDF, practice through simulators, and follow strategies for better trading results.