Candlestick trading is the most common and the most easy-to-understand form of trading that there is today. But are you getting the most out of what the candlesticks are showing you and are you using them in the best way? come on let’s explore five oaks now today we’re going to be looking at the all-important Japanese candlestick charts and why if you understand what they’re showing you can make your life a whole lot easier as a trader now not only do they give you a possible insight into what prices may be doing next but they can also be used to define the exact rules of entry and exits and I found over the years many aspiring traders struggle with just that so having some definable victory based on candlestick patterns can really help the aspiring trader now before I continue let me first remind you that I now stream live on Facebook every Monday at p.m.
London time so you can watch me put all my teachings into a live trading environment now just follow the link above and you’ll be getting straight in there for next Monday also don’t forget to subscribe to the channel here at YouTube if you don’t already do so and click that little bell icon and that way you’re gonna get an alert at the moment I release my next video ok let’s get straight into it okay so before we get into the specifics of the candlestick chart and patterns that are thrown up I want to explain to you the three different chart types that traders use when they’re training in the markets basically you’ve got the line chart the bar chart and of course the candlestick chart now as with any chart you normally have the time on the horizontal axis and price is on the vertical axis same with our trading charts here you can see the line chart now the line chart consists of a single line and the single line is plotted by looking at the closing price in a particular time period being a five minute time period or an hourly or weekly or so forth so ignores the price extremes the highs and the lows in that particular time period it only focuses on the closing price so powerful if you use these looking for key turning points especially on the high team timeframes like the daily and the weekly then you’ve got the bar chart now the bar chart shows you a bit more information than the line chart it shows you where it opened it shows you where it closed you get to see a picture of where the market is going it doesn’t show you as much as the candlestick chart but it shows you slightly more than the line chart shows you price extremes highs and lows and so forth I find that a little bit hard sometimes to actually predict trend by looking at that but of course that is a matter of preference then of course you’ve got the all-important candlestick chart this shows us much more information and when you plot these candles together against each other they can be quite powerful in predicting the future price movements have a look at them now in more detail ok so as we know markets are moved by human behavior buyers move the market up and sellers move the market down now the candlestick chart shows us basically who is winning the battle in a particular time period are the buyers more in control or the sellers more in control and the kind of stick charts shows us a good visualization of just that now a candlestick chart is typically colored blue or sometimes green if the buyers have control if the market opens down here and then moves all the way back up and closes here that basically means the buyers were in control so if the market closes higher at the mode opened the candle will be colored blue and the example here if the market opened up here and then trades down because the sellers had control and closes down here typically the candle will be colored red so it closes lower than where it opened now also on a candlestick chart you sure you have these what are known as shadows all wicks it shows you where price went to in that particular time period so for example here market would have opened traded down to possibly down here and then right back up buyers took control the buyers are winning this particular candle up to a high up here and then some sellers come in and it closes back down here so this is a bullish candle and exactly the same on the other candle here the reverse market opens here potentially trades up a little bit and then trades down the sellers have control takes it down to this new low down here then some buyers come in and it closes here the sellers won that particular candle sellers were more prevalent than the buyers in that particular time period so candlestick chart shows you the open the close the high and indeed the low so lots of information going on on one particular candle now looking at a particular candle on its own isn’t the best way to do it you need to be looking at these candles in conjunction with other candles surrounding it and also at key levels key levels of support and resistance and when you match these together it can give you a very good indication of where price may go in the future can also give you a good entry and exit levels as I previously discussed let me explore okay so these are the main patterns that we look at in our trading certainly the ones that we look at in the strategies that we trade live every day in our trading very simple to understand let me briefly explain exactly what they’re showing you so here you’ve got a bullish engulfing pattern this basically means that the candle to the right fully engulfs the candle to the left so here the market opened up here went to this high created back down to this low close down here puts in this candle here this bearish candle now the next candle opens it and fully trades down but then fully engulfs the previous candle this is a bullish candle this indicates that the market is going to go up and move to the upside now we look for these at key turning points at key levels of support and resistance if you see one of these coming in at a support zone that is a good high probability that that is going to be leading to a move to the upside and as I said you can use these candlesticks for entries and exits so typically your strategy in fact one of the strategies we use we’ll look at this precisely this way we would look to enter at a break above this particular higher this candle and our stop could be halfway down the bullish candle or indeed could be a few pips below the base of this so it leaves nothing to the imagination you’ve got some define rules enter at the break of the high with a stop at the break of the low now we’ve got the bearish engulfing exactly the same but in the opposite direction here you’ve got a bullish candle but then the candle to the right fully engulfed slits and closes lower fully engulfing the previous candle this is a bearish candle looking for a move to the low side when you see a bearish engulfing at a key level of resistance up here for example this gives you a high probability that this market is going to trade down and as I say you have two defined rules of entry as well with your strategy you could enter at the break of this low of the engulfing candle or you could have and you can have your stop at above the high of the engulfing candle as well you may have a strategy that uses 50% of that cap but again you’ve got some defined rules that you can lock in to them a very powerful turning point the bearish and golfer at key levels of resistance then you’ve got the hammer candles you’ve got the inverted hammer and the hammer candle okay basically this shows you that this sellers were and controlled markets opened here it moved up but then closed right the way down so opens here closes here market moves up and then the sellers take control and they push price back down for a lower close than where it opened this is a very bearish candle this is a rejection candle it’s rejecting a level up here this could indicate a move to the low side a very simple candlestick pattern that can be very very powerful in picking turning points you can also use this inverted hammer with the trend as well if the market is trending down and you see one of these hammer candles come in or ie a break higher but then choices back down again that indicates that the buyers basically ran out of steam the sellers took control and continuing on down with the trend exact reverse for the hammer candle this is here and the buyers took control to the market Oh here trades all the way down so the sellers have control then the buyers come back in take control and push the market higher again this is a blue hammer candle it’s a bullish hammer candle it’s showing you that the buyers are in control and the price down here was rejected this level of support is now being respected and of course prices took off in the northerly direction a very bullish candle can be used to pick turning points in a downtrend if you see this at the bottom of a downtrend then this could indicate that the move is now going to be up the also is very good in the in the in the trendy markets if you see a market that’s trending up and then you see one of these candles came in at break lower maybe the sellers have got control but then closes up again this indicates that the market wants to continue in that northerly direction a very very powerful candlestick pattern when you take into consideration support and resistance with trend and counter trend then you’ve got the old famous at doji now the doji represents an area of indecision who won control of that particular time period was it the Bulls was it the buyers was it the sellers well clearly neither one control is an area of indecision indecision basically means the market is undecided where it’s going to go so looking at the doji on its own basically is not really the best way to play a doji it’s the best way the player doji is looking at the next candle afterwards the next couple of candles to see what price is actually doing mark is in undecided mode the next couple of candles could be very crucial in terms of where the market might go again so doji is again a very very powerful cattle show you something maybe is about to happen if you see a number of these doji’s and then a break higher and that indicates the market wants to push higher if you see a number of these doji’s and then a break lower then it indicates a potential roll back the market wants to trace out let’s look at these now in a bit more detail okay so here we see a collection of candles now clearly this is on the whiteboard and I put these examples out and they obviously are going to work otherwise I’ll be wasting my time or what show you the patterns where they are significant and where they work of course what you need to do is go onto the world price chart and look for these patterns at key levels of support and resistance to yourself to see them in the real world and in fact straight off this whiteboard demonstration I’ll jump onto the screens and show you an example in the Australian against the US dollar on the 4-hour chart which is actually working quite well as we speak here right – so we start off here markets trading up I’ve drawn here as you can see some resistance and and support levels so we’re looking for price action to expect these levels market here is just meandering what around we’re moving up we now breach the level of resistance to the upside indicated by this dotted line market trades up Bulls are in control and then the sellers come in and push this market down that’s showing you that this level of resistance is being respected that is a good indication in conjunction with the level of resistance that this market wants to trade back down and of course as luck would have it it is trading back down who are trading back down and we’re coming back in now to the level of support level of support is broken with this bearish candle Bears are in control the sellers are in control then it hits a wave of buying and the buyers now are becoming more prevalent to the market demand is there they’re pushing the prices up and it completely engulfs this previous bearish candle which took us through in the first place this is a bullish pattern at a level of support so this market now looks as though it wants to trade up indeed that’s exactly what happens let me come into these candles remember what these are called these are the doji candles these are the areas of indecision the market doesn’t quite know what is gonna what it wants to do just coming into the level of resistance we put in a couple of doji’s and then indeed we break lower to the low side of the doji indicates that potentially the down trend will continue so after an era of indecision the next candle is crucial that shows us that the market now wants to potentially move back down and indeed it does okay so now we come back into this level of support trades through the level support looks as though the payers are in control looks as though the sellers have control but then the wave of buying comes back in and pushes price back up for a bullish hammer hammer candle they’re depicted by the body of the candle the main body of the candle being in the top third of the whole range of that candle that’s a bullish hammer at a level of support market now wants to move back up again has a bit of a wobble here market trades down comes back down engulfs that candle but then trades up again so this is now a British hammer with the trend this is against the trend you see here trend is down up this is with the trend so these hammer candles inverted and hammer candles can work in both directions with and counter trend machi moves back up again through the level of resistance looks as though it wants to go higher and then this next candle completely engulfs this candle at the level of resistance indicating that this uptrend has now come to an end and looking to move back down again as I said you can use these candles for levels of entry so for example if you up here and you want to take this advantage take this tray to the downside you may have a stop say at 50% of the hammer cans the inverted hammer count all you might want you stop above the high of the hammer candle same back down here if you take this long trade here you might want to stop below here again defined reasons why to exit and enter the trade again if you’re trading these doji’s you may wish to enter the break of the doji’s with a stop the other side of the doji saying back down here the hammer you may wish to enter as the break of the hammer candle or indeed if it pulls back to 50% with the stop below so you can use these hammer candles as I say all these candlestick patterns as anchor points to enter and exit and so forth what we’re now going to jump on to the screen so I’m going to show you a live chart as of today the day of recording I just looked before I came into the studio here and it’s the Aussie against the US dollar just show it in real time but I encourage you to go and do your own analysis look at a price chart to see if indeed you can spot these patterns and how powerful they are come on let’s go okay so that was a quick demonstration on the white Lord showing you the patterns that we look for in our trading now they’re very simple to spot once you know what you’re looking for I talked about these throughout my trading in the live training room we’ve got a number of strategies that are based around these candlestick patterns so do go and check that out when you can for now I just want to jump onto a price chart to show you how these candlestick patterns give us early warning signs at key levels of support and resistance come on okay so what I’ve done here is drawn in some key levels of support and resistance and I have simply highlighted the areas in green where price has respected these levels putting in one of our patterns that we’ve discussed so if you look here to the left market is moving up nicely it breaks through this level of resistance now acting as support and indeed it comes back down into that level of support puts in this bullish engulfing pattern that’s indicating that this level of previous resistance or support is going to be respected and indeed prices move back up again and here we see now back up to this next level of resistance it holds it for one two three four five candles and then puts in this bearish engulfing there’s big bearish engulfing which is the fifth rejection of that level of resistance and we roll back again and back into the level of support know your price action there up again and then back down into this level of resistance is the market going to continue with the trend to the downside it looks like it then it has this pull back in and then it has a rejection of this old level of support now acting as resistance puts in this bearish engulfing indicating this wants to roll back and then T there’s quite a few pips to be had there finally does turn back and then back up again into this level of resistance puts in this really powerful inverted hammer candle there that shows you a rejection going on there doesn’t reject it too much it does indeed have a second attempt at that level but then puts in the confirmation this is the bearing golfer engulfing the previous two candles following on from this candle hit that is a good indication and indeed their last candle there that last inverted hammer can in the case this really does one of our backs that’s a very powerful set up there I think we took that in the room as well actually and then that one rolls back down into the level of support puts in this hammer candle again and off we go again to the upside back down again to the level of support here you’ll see this little doji in here this is a four-hour doji indecision are we going to continue through is it going to bounce back up next candle confirmation that we’re looking to trade back up and then it puts in this hammer candle in the direction of the previous bar indicates that this wants to roll indeed back up to the highs of the resistance level and then we have this again really powerful inverted hammer candle reaches through the level of resistance and closes low off we go to the downside until we finally put in this bullish in golfer at the bottom takes us up again to the resistance level so the resistance levels and support levels have been respected you enter when you see these candlestick patterns confirming here again we’ve got we’ve got this pinball rejection and then the bearish par follows on and off B roll back into support puts in this bullish pin bar confirmation that we want to roll back again and indeed where we are now this is only a few hours ago we’ve got this pin bar coming in so this is the rejection candle of this resistant zone this is live now as we speak I’m not sure if it’s going to roll back down and and confirm that this is a rejection but certainly this is a bearish little pattern in here at the moment so as I say you can use these pens and with trend with Calla trend you can use them for entries you can use them for exit strategy now we have a number of strategies that use this type of candlestick pattern formation we look for these all day long and our livestreams we’ve also got some tools that actually find these patterns for you and you can download those for your charge from the trading room occasionally to attend the trading room seven day free trials do click the link above should you wish to try us out I’m sure you won’t regret it when you can see the power of these wouldn’t be amazing if you can accurately predict the key turning points in a market and I showcase this every day in our live streams okay so I hope you found that useful hopefully now you can see the power behind these very simple Japanese candlestick charts if you like my 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Japanese Candlesticks are without a doubt the most popular way to look at the financial markets.
In today’s video, I will explain the different candlestick patterns and show you the ways you can apply them to the charts!
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01:50 – Line Chart
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