The secret to reading Candlestick Patterns —How to time your trading entries with deadly accuracy

At this point:
You’ve learned the large picture of Price Action Trading.
You know where to enter your trades (Support and Resistance) and what you’ll do in different market conditions (the 4 stages of the market).
But there’s still one a part of the puzzle missing and that’s when to enter a trade.
So, that’s where candlestick patterns works play.
Let’s dive in…

What is a candlestick pattern and the way does it work?

A candlestick pattern has 4 data points:
Open – The opening price over selected period of time
High – the highest price over selected period of time. Low – the lowest price over selected period of time
Close – The closing price over selected period of time
Here’s what I mean:

candlesticks

For a Bullish candle, the open is usually below the close.
And for a Bearish candle, the open is usually above the close.
Next, you’ll learn a couple of powerful candlestick patterns to assist you better time your entries…

• Hammer
• Shooting Star
• Bullish Engulfing Pattern
• Bearish Engulfing Pattern

I’ll explain…

Hammer

HAMMER PATTERN

A Hammer may be a (1- candle) bullish reversal pattern that forms after a decline in price.
Here’s the way to recognize it:
• Little to no upper shadow
• the worth closes at the highest ¼ of the range
• The lower shadow is mainly about 2 or 3 times the length of the body
And this is often what a Hammer means…

  1. When the market opens, the sellers took control and pushed price lower
  2. At the selling climax, huge buying pressure stepped in and pushed price higher
  3. The buying pressure is so strong that it closed above the opening price
    In short, a hammer may be a bullish reversal candlestick pattern that shows rejection of lower prices.
    Now, simply because you see a Hammer doesn’t mean the trend will reverse immediately.
    You’ll need more “confirmation” to extend the chances of the trade understanding and I’ll cover that in details later.
    Moving on…

Bullish Engulfing Pattern

Bullish Engulfing Candlestick Pattern

A Bullish Engulfing Pattern may be a (2-candle) bullish reversal candlestick pattern that forms after a decline in price.
Here’s the way to recognize it:
• the primary candle features a bearish close
• The body of the second candle completely “covers” the body of the primary candle (without taking into consideration the shadow)
• The second candle closes bullish
And this is often what a Bullish Engulfing Pattern means…

  1. On the primary candle, the sellers are on top of things as they closed lower for the selected period
  2. On the second candle, strong buying pressure coming in and closed above the previous candle’s high — which tells you the buyers have won the battle for now .
    In essence, a Bullish Engulfing Pattern tells you the buyers have overwhelmed the sellers and now are in control .
    And lastly, a Hammer is typically a Bullish Engulfing Pattern on the lower timeframe because of the way candlesticks are formed on multiple timeframes.
    Here’s what I mean:

Make sense….

Shooting Star

Shooting Star

A shooting star may be a (1- candle) bearish reversal pattern that forms after a advanced in price.
(The opposite of shooting star is Hammer.)
Here’s the way to recognize it:
Little to no lower shadow
the worth /price closes at rock bottom ¼ of the range
The upper shadow is about 2 or 3 times the length of the body

And this is often what a meteor means…

  1. When the market opens, the buyers took control and pushed price higher.
  2. At the buying climax, huge selling pressure stepped in and pushed price lower.
  3. The selling pressure is so strong that it closed below the opening price
    In short, a meteor may be a bearish reversal candlestick pattern that shows rejection of higher prices.
    And one last one…

Bearish Engulfing Pattern

Bearish Engulfing candlestick Pattern

A Bearish Engulfing Pattern may be a (2-candle) bearish reversal candlestick pattern that forms after a uptrend in price.
Here’s the way to recognize it:
The primary candle features a bullish close .
• The body of the second candle completely “covers” the body of the primary candle (without taking into consideration the shadow).
• The second candle closes bearish
And this is often what a Bearish Engulfing Pattern means…

  1. On the primary candle, the buyers are on top of things as they closed higher for the selected period.
  2. On the second candle, strong selling pressure stepped in and closed below the previous candle’s low — which tells you the sellers have won the battle for now.
    In essence, a Bearish Engulfing Pattern tells that the sellers have overwhelmed the buyers and now are in command.
    Now…
    What you’ve just learned are a number of the foremost powerful reversal candlestick patterns.
    But, they’re not the only ones are there.
    In fact, there are many variations that it’s impossible to hide beat one guide.
    But the great news is, you don’t got to memorize all the candlestick patterns to know what the market is telling you.
    Here’s how…

Candlestick patterns cheat sheet: the way to
understand any candlestick pattern without
memorizing one one

To understand any candlestick patterns, you simply got to know 2 things…

Where did the worth close relative to the range?

What’s the dimensions of the pattern relative to the opposite candlestick patterns?


Let me explain…

1.Where did the price close relative to the range?

This question allows you to know who’s on top of things . Look at this candlestick pattern…

Let me ask you…
Who’s in control?
Well, the worth/price closed the near highs of the range which tells you the buyers are in control.
Now, check out this candlestick pattern…

Who’s in control?
Although it’s a bullish candle the sellers are literally those on top of things .
Why?
Because the worth/price closed near the lows of the range and it shows you rejection of higher prices.
So remember, if you would like to understand who’s on top of things , ask yourself…
Where did the worth close relative to the range?
Next…

2. What’s the dimensions of the pattern relative to the opposite candlestick patterns?

This question allows you to know if there’s any strength (or conviction) behind the move.
What you would like to try to to is compare the size of the present candle to the previous candles.
If the present candle is far larger (like 2 times or more), it tells you there’s strength behind the move.
Here’s an example…

BULLISH ENGULFING CANDLESTICK PATTERN REFLECTS HIGH CONVICTION

And if there’s no strength behind the move, the size of the present candle is about the same size because the previous ones.
An example…

Does it make sense?
Great!
Now you’ve got what it takes to read any candlestick pattern without memorizing a single one.

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