The ONLY Candlestick Pattern Guide You'll EVER NEED

Summary

This video script delves into the art of candlestick pattern analysis for successful trading. It highlights the importance of identifying patterns like the engulfing candle, momentum candle, and multiple candlestick patterns to predict market direction. The script also touches on the significance of doji, hammer, shooting star, tweezer, and marubozu patterns, offering insights into market reversals and trends. A bonus tip introduces using TradingView indicators to spot these patterns effortlessly, aiming to enhance viewers' trading strategies and avoid false breakouts.

Takeaways

• 📈 The video discusses a recent successful trade that resulted in a 10% gain, highlighting the importance of candlestick patterns in predicting market movements.
• 🕯️ The 'Engulfing Candle' is a strong reversal pattern where a candle of the opposite color completely engulfs the previous candle, signaling a potential trend reversal.
• 📊 The 'Momentum Candle' is a large candle, two to three times bigger than the previous ones, indicating a strong directional move that is likely to continue.
• 🔄 The 'Multiple Candlestick Pattern' involves three or more candles with wicks going in the same direction, suggesting a higher probability of the price respecting the pattern and moving accordingly.
• 🍬 The 'Doji Candle' represents market indecision and is often followed by a reversal, especially when confirmed by additional candles of the same color.
• ⛏ The 'Hammer' is a bullish pattern with a small body and a long lower wick, indicating that buyers have absorbed selling pressure and may drive the price up.
• 🌠 The 'Shooting Star' is similar to the hammer but with a small body and a long upper wick, suggesting a potential bearish reversal.
• 🪢 The 'Tweezer' pattern consists of a red and a green candlestick with similar lower wicks, indicating potential upward momentum, with the bearish version having upper wicks.
• 🟢 The 'Bullish Marubozu' is a green candlestick without wicks, signaling strong buying pressure and a likely continuation of the upward trend.
• 🔴 The 'Bearish Marubozu' is a red candlestick without wicks, indicating strong selling pressure and a probable continuation of the downward trend.
• 🛠️ TradingView can be used to add candlestick pattern indicators, which automatically highlight when specific patterns occur, aiding in pattern recognition without memorization.

Q & A

What is the main topic of the video?

The main topic of the video is candlestick patterns and how they can be used to predict market direction and improve trading strategies.

What is an 'engulfing candlestick' and how does it indicate a potential market reversal?

An 'engulfing candlestick' is a candle that is in the opposite color of the previous one and completely covers it, indicating a potential market reversal at the point where it appears.

Why is it important to combine candlestick patterns with other trading tools and strategies?

Combining candlestick patterns with other trading tools and strategies helps to avoid relying solely on patterns, which can sometimes be misleading, and provides a more comprehensive approach to trading.

What is a 'momentum candle' and how can it be used in trading?

A 'momentum candle' is a large candle that is two to three times bigger than the previous candles. It can be used in trading as an indicator that the price is likely to continue in the direction of the candle, especially in choppy markets.

How can the 'multiple candlestick pattern' be used to identify key support or resistance levels?

The 'multiple candlestick pattern', which consists of three or more candles with wicks going in one direction, can be used to identify key support or resistance levels when these candles appear exactly at these levels, indicating a higher probability of price reversal.

What does a 'doji candle' represent and how can it be used as a trading signal?

A 'doji candle' represents market indecision and can be used as a trading signal for a potential price reversal, especially when it appears after a strong trend and is followed by additional confirming candles of the opposite color.

What is the significance of a 'hammer candle' in predicting market direction?

A 'hammer candle', characterized by a small body and a long lower wick, signifies that buyers have absorbed the selling pressure and pushed the price back up, indicating a bullish signal and potential continuation of the upward trend.

How does a 'shooting star candle' differ from a 'hammer candle' and what does it indicate?

A 'shooting star candle' is similar to a 'hammer candle' but has a small body and a long upper wick. It indicates a bearish signal, suggesting that the price may reverse and start moving downwards after a strong upward trend.

What is the 'tweezer pattern' and how can it signal a potential market move?

The 'tweezer pattern' consists of a red candlestick followed by a green one, both with similar wicks on the bottom, signaling a potential upward move. Conversely, a green followed by a red with similar wicks on the top signals a potential downward move.

What is a 'marubozu candle' and how can it confirm the continuation of a trend?

A 'marubozu candle' is a large candle without any wicks, indicating that the opening and closing prices were the same for the bullish version and that the trend is likely to continue in the upward direction. The bearish version indicates a downward trend continuation.

How can trading platforms like TradingView assist in identifying candlestick patterns?

Trading platforms like TradingView can assist by providing indicators that notify traders when specific candlestick patterns occur, making it easier to spot these patterns without having to memorize and manually identify them.

Outlines

00:00

📈 Trading Success with Candlestick Patterns

The speaker shares their recent successful trade that yielded a 10% gain, attributing it to their understanding of candlestick patterns. They introduce the concept of candlestick patterns as a tool for predicting market direction and becoming a more successful trader. The video promises to share favorite patterns used daily, starting with the 'engulfing candle', which signals a reversal in market direction. The speaker emphasizes the importance of using candlestick patterns alongside other analysis tools, such as support and resistance levels and indicators, rather than relying solely on them for trading decisions.

05:02

🔍 Advanced Candlestick Pattern Analysis

This paragraph delves into various candlestick patterns and their implications for trading. The 'momentum candle', characterized by its large size relative to previous candles, is highlighted as a powerful indicator, especially in choppy markets. The 'multiple candlestick pattern', where three or more candles show wicks in the same direction, is another key pattern discussed, often signaling a strong market sentiment. The 'doji candle', with its thin body and wicks on both sides, indicates market uncertainty and potential reversal. The 'hammer' and 'shooting star' patterns are explained as signs of strong buying or selling pressure, respectively. The 'tweezer' pattern, consisting of two candles with similar wicks, suggests an upcoming price movement in the direction of the wicks. Lastly, the 'marabozu' pattern, a large candle without wicks, indicates strong control by buyers or sellers, suggesting the continuation of the current trend.

10:04

🎓 Bonus Tip: Utilizing TradingView for Pattern Recognition

As a bonus for viewers who reached the end of the video, the speaker provides a tip on how to use TradingView to identify candlestick patterns. By using the platform's indicators tab and selecting specific patterns, viewers can receive notifications when these patterns appear on their charts. This feature simplifies the process of spotting patterns without the need for memorization. The speaker also mentions the issue of false breakouts, where patterns suggest a certain market movement that does not occur, and invites viewers to watch another video for strategies to avoid such pitfalls. The video concludes with a call to action for viewers to like the video and a teaser for additional trading strategies.

Keywords

💡Candlestick Pattern

A candlestick pattern is a graphical representation used in technical analysis to identify trends and reversals in the price of a security. In the video, candlestick patterns are the central theme, with the speaker discussing various patterns such as the engulfing candle, momentum candle, and doji, which are used to predict the direction of the market and make trading decisions.

💡Engulfing Candle

An engulfing candle is a specific candlestick pattern where a candle of one color completely covers a previous candle of the opposite color, signaling a potential trend reversal. The video uses the bullish engulfing candle as an example, where it appears at a support level, indicating a strong sign for the price to go up.

💡Momentum Candle

A momentum candle is a large candle that is two to three times bigger than the previous candles, suggesting that the price will continue in the direction of the candle. The video mentions that this pattern is particularly effective in choppy markets, where a significant momentum candle can indicate the start of a new trend.

💡Multiple Candlestick Pattern

This pattern occurs when three or more candles have wicks going in the same direction, indicating a strong presence of buyers or sellers. The video explains that the more candles in this pattern, the higher the probability that the price will respect the pattern and move in the direction of the wicks.

💡Doji Candle

A doji candlestick has a very thin body with long wicks on both sides, indicating indecision in the market and a potential reversal. The video describes using a doji as a sign of uncertainty, where after seeing a doji, the speaker waits for additional confirming candles of the same color before entering a trade.

💡Hammer Candle

A hammer candlestick is characterized by a small body with a long lower wick and little or no upper wick. It typically appears at the bottom of a downtrend and signals that buyers have absorbed the selling pressure and could lead to a price increase. The video mentions the hammer as an extremely bullish sign.

💡Shooting Star

A shooting star is a candlestick pattern with a small body and a long upper wick, often appearing at the top of an uptrend. It suggests that sellers have pushed the price down from the high of the wick, indicating potential weakness and a possible reversal. The video describes the shooting star as a bearish signal.

💡Tweezer Pattern

The tweezer pattern consists of a red candlestick followed by a green one, both with similar wicks at the bottom, suggesting a potential upward movement. Conversely, a bearish tweezer pattern has wicks at the top. The video uses the tweezer pattern as an example of a bullish signal when the price respects a support level.

💡Marubozu

A marubozu is a candlestick with very short or no wicks, indicating strong buying or selling pressure with no reversal during the period. A bullish marubozu has no upper wick, while a bearish one has no lower wick. The video explains that a marubozu in the middle of a trend confirms the trend's continuation.

💡False Breakout

A false breakout occurs when a candlestick pattern suggests a certain price movement, but the price does the opposite. The video mentions a strategy to avoid false breakouts, which is important for traders to minimize incorrect interpretations of candlestick patterns.

💡TradingView

TradingView is a popular web-based platform for traders to analyze financial markets and create charts. The video suggests using TradingView's indicators feature to identify candlestick patterns, making it easier for traders to spot these patterns without memorizing them.

Highlights

Introduction to the importance of candlestick patterns in predicting market movements and enhancing trading success.

Explanation of the Engulfing Candlestick as a strong reversal signal, with a detailed description and example.

The significance of support and resistance levels in conjunction with the Engulfing Candlestick for trade confirmation.

Caveats about relying solely on candlestick patterns for trading decisions, emphasizing the need for additional tools and strategies.

Illustration of a Bearish Engulfing Candlestick at resistance levels as an indicator for short positions.

Introduction to the Momentum Candlestick, characterized by its size and its impact on market direction in choppy markets.

The role of the Momentum Candlestick in signaling the continuation of market direction post sideways movement.

Description of the Multiple Candlestick Pattern and its effectiveness when combined with support and resistance analysis.

The Doji Candlestick's role in indicating market uncertainty and potential reversals.

Advice on confirming Doji Candlestick signals with additional same-colored candles for increased reliability.

Explanation of the Hammer Candlestick as a bullish sign after a period of selling pressure.

The Shooting Star Candlestick's resemblance to the Hammer and its implications for potential market reversals.

The Tweezer Candlestick Pattern's indication of an upcoming upward movement when identified correctly.

The Marabozu Candlestick Pattern's significance in confirming the continuation of an existing trend.

A bonus tip on using TradingView indicators to automatically identify candlestick patterns, reducing the need for memorization.

Acknowledgment of the issue of false breakouts in candlestick pattern trading and a teaser for a strategy to avoid them.

A call to action for viewers to like the video and an invitation to learn more about avoiding false breakouts in a follow-up video.

Transcripts

here's a recent trade i just finished a

huge 10 gain and massive profit helping

out my portfolio so much how did i know

this chart was about to go up because of

this candlestick pattern right here and

in this video i'm gonna share my

favorite candlestick patterns just like

this one that i use on a daily basis

that way you can read and understand

chart patterns predict chart direction

become a more successful trader and make

plays just like this one let's get

straight to it shall we

[Music]

one of my favorite and most used

candlestick patterns i like to trade

with is the engulfing candle i've used

it in many of my previous videos it's

such a strong candlestick because it can

give you the exact point of when a

reversal is about to happen what is an

engulfing candlestick well it basically

explains itself in the name it's a

candlestick in the opposite color of the

previous candle and it simply engulfs it

a bullish engulfing candle opens at or

is lower than the previous candles close

and closes above the previous candles

open so basically being bigger than the

previous candle on both sides making it

look as if it's engulfing it let me show

you an example so here we found a pretty

strong support where price bounced off

it multiple times telling us it really

respects it we see the price comes back

down to the support we can expect it to

bounce back up but before entering we

need a little more confirmation rather

than just assuming the support will hold

that's when we see a bullish engulfing

candle it completely engulfs the

previous red candle and is exactly at

the support this is an extremely bullish

sign and we can be pretty confident the

price will go up from here so we enter

the trade and look what happens now it's

also important to note that just because

there is a bullish or bearish engulfing

candle doesn't mean the price is going

to reverse in that direction every time

you shouldn't be just trading purely off

candlestick patterns you should be using

them as almost if they were hints on

which way the market is about to go not

pure decision makers you should be using

other tools with candlestick patterns

like support and resistances indicators

different strategies etc so just to be

clear just because you see a bullish

engulfing candle doesn't mean the price

will go up from there but it can be a

good indicator that the price will head

in that direction let me show you a

bearish example so here we have the same

type of setup a strong resistance where

the price respected it multiple times

before and we see the price comes back

up and starts to slow down giving us a

bearish engulfing candle completely

engulfing the previous green candle we

see that it got rejected at the

resistance and there was a bearish

engulfing candle indicating this is a

good sign to go short and look what

happens price goes down next we have the

momentum candle the momentum candle is a

lot easier to spot than the engulfing

candle purely because of its size a

momentum candle is simply a candle that

is two to three times bigger than the

previous candles before it this candle

can be insanely powerful because most of

the time after it happens the price will

continue to go in that direction making

this point a great time to enter the

most efficient and effective way to use

this candlestick pattern is in choppy

markets where the price is moving

sideways if you ever see a sideways

market then a huge momentum candlestick

appears being two to three times bigger

than the previous candles you can be

pretty certain that the price will

continue in that direction why is that

well think of it like this whenever

there is a sideways market like this

there are a lot of shorters stuck in

their trades they don't want to exit

their trade yet because the price is

moving sideways and it can honestly

still move in either direction they draw

their support and resistance and set

their stop losses right above the

support so that means they're going to

be tons of traders setting stop losses

all over this area meaning if there's a

sudden price movement and price hits

this liquidation zone all these stop

losses will be hit just adding fuel to

the fire for this price to keep moving

up also when price breaks a choppy

market like this it'll usually start a

trend in that direction it's the same

type of strategy with shorts if there's

a choppy sideways market and you see a

huge red candle two to three times

bigger than the candles before it this

is a great indicator to enter a short

position because it's likely the price

will continue to move downwards next we

have the multiple candlestick pattern

this is one of my favorites as it

usually holds pretty true on charts and

it's also pretty simple all it is is

when you have three or more candles that

have wicks going one direction the more

candles the better i like to pair this

candlestick pattern with support and

resistances so look at this chart what

do you see happening well for one we

have a key support where price bounces

off multiple times then we have multiple

candles with wicks going downwards

exactly at the support as you can see

all these candles have downward wicks

telling us that sellers are trying to

break the support but buyers keep

fighting them off and are winning

multiple times confirming that this is a

key support and price has a good chance

of bouncing upwards as said before the

more candles the better the probability

the price will respect that pattern

let's go over a short example price

moved to the resistance there are

multiple candles with wicks heading

upwards telling us that price really

doesn't want to move up from here giving

us a good short entry so we enter here

expecting price to reverse from this

point and look what happens it does next

we have the doji candle the doji candle

is a candlestick with a very thin body

and it has wicks on each side why this

one is so important to understand is

because it can be a great indicator on

when the price is about to reverse in a

direction what this candle basically

represents is the market is uncertain on

which way it wants to go and is having

resistance whenever there is uncertainty

or resistance the price will more often

than not head in the opposite direction

let's see an example so here we have

price moving down pretty hard then a

green candle appears and it just so

happens to be a doji candle this is

telling us that sellers are starting to

be less confident and buyers are

starting to enter making this point a

great potential place to enter what i

normally like to do with doji candles is

after i see one i'll wait for two or

more candles the same color to confirm

that the price will reverse so in this

example i see a green doji candle i wait

see two more green candles heading

upwards telling me i can be confident

that the price will continue in that

direction so this is the point where i

enter the trade and boom the price goes

up from here there are multiple

different variations of the doji candle

that you might see there is the regular

one which is the one that we just talked

about in the last example the

long-legged doji candle which is

basically the same candle but just has

larger wicks the dragonfly which has a

small body and a big bottom wick then

the gravestone which has a small body

and has a big upper wick all of these

tell the same exact story a reversal in

price the next candlestick we'll be

looking at is the hammer the hammer is

usually a candle that looks like this a

decent sized body and a long wick what

this candle is telling us is that

sellers got the price all the way down

to here but the buyers absorbed all that

selling pressure and raised the price

all the way back up this is usually an

extremely bullish sign and can tell us

that the market will continue to go in

that direction a candlestick that is

very similar to the hammer is the

shooting star the shooting star is just

like the hammer but it has a small wake

on the opposite side you should be

playing this just like the hammer where

if you see a shooting star candle like

this you can have a good suspicion that

the price will start reversing this next

candlestick pattern is called the

tweezer this pattern is a red

candlestick followed by a green

candlestick both having similar wicks on

the bottom if you see this pair you can

have a pretty good idea this chart is

about to move upwards let's see an

example so here we can see price is

about to hit this support we see a red

candle with a wick on the bottom right

at the support then we see a green

candle that also has a wick heading

downwards this is telling us that the

price is respecting this support and is

now getting some momentum upwards this

would be a great time to buy and look

what happens price raises it's the exact

opposite for a bearish signal so you

want to see a green candlestick then a

red both having wicks at the top we see

that exact pattern here and boom price

falls the last and final candlestick

pattern i want to talk about is the

marabozu the bullish maribozu is going

to be a big green candle without any

wicks so basically just a big green

rectangle the cool thing about this

pattern is that it's a good indicator

that price will keep heading in the same

direction it's going you will usually

see this candle in the middle of a trend

confirming that the trend will keep

moving upwards let's see an example so

here we saw a price reversal price is

starting to head upwards then we see a

bullish maribozu candle notice how the

candle has no upper or lower wicks this

means that the lowest price of this

candle was the exact same as its opening

price and the highest point of this

candle is the exact same as its closing

price this is telling us that buyers

have complete control and we can almost

certainly predict that price will

continue to go upwards and look what

happens it does the bearish maribozu is

the same idea a red candle with no winks

here we see the price had a reversal we

see a bearish maribozu candle telling us

sellers have control and the price will

probably keep moving downwards we enter

making this a winning trade now it's

time to give you a bonus tip for all

those who made it to the end of the

video this is a way of me saying thanks

for watching all the way to the end even

though you should probably try to

memorize these patterns so when you see

them you can have an idea of what the

market is going to do in the back of

your head i completely understand that

it's hard sometimes to look for them or

even remember what they look like well

lucky for you there is a way to make it

so you can have your chart tell you

exactly where a certain type of

candlestick pattern occurs which makes

it really easy for you to spot them and

you don't even necessarily have to

memorize them to do this just go to

trading view click the indicators tab

type in whatever candlestick pattern you

want so for this example we'll do a

bullish engulfing simply click it and

training view will notify you on the

chart when the bullish engulfing candle

appears making it extremely easy to spot

when it happens and you don't even have

to look that hard you can also add

multiple candlestick patterns to your

chart so you can identify when any of

them occur i hope you guys got some

value out of this and you learned

something new if you did i would really

appreciate it if you took five seconds

out of your day and like this video the

one and only problem trading with

candlestick patterns is false breakouts

where a certain candlestick pattern

occurs but the price actually does the

exact opposite of what the pattern

predicts if you want to learn how to

avoid situations like this watch this

video where i go over my secret strategy

to avoid false breakouts thanks for

watching and i'll see you guys

next time

[Music]

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