some basics of candlestick chart

Some Basics of Candlestick Charting

So when we analyse each bar we’re actually learning what other people are thinking in the conviction of that particular move in the stock this could be a two-minute bar a five-minute bar a 60-minute bar this could be a weekly bar with five trading days in it. So I think you get the point […]

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Now one of the first lessons we teach then is you don’t trade stocks you trade people.

We obviously start off with green and red candles and we want to talk about this for just a minute then I’ll tell you show you just a sequence of candles in a moment.

But in this case we have a green candle you can see where it opened you can see we’re closed.

You can see the low and the high obviously if we got into this green candle and we’re thinking we wanted to take a long trade what kind of candle would we really want to see after this green candle another?

Right that’s obviously what we’d like to see so every case the candle now becomes support and resistance so the bottom of the candle if we were to fall down below the bottom the candle would be breaking support.

If what we want to see is the next candle comes up above to break this area of resistance so that we can that’s so that we can then move up to another bar and the lower of the bar then becomes new support and so forth and so on.

some basics of candlestick chart

So when we analyse each bar we’re actually learning what other people are thinking in the conviction of that particular move in the stock this could be a two-minute bar a five-minute bar a 60-minute bar this could be a weekly bar with five trading days in it.

So I think you get the point that it doesn’t make any difference what type of bar that is what’s important is that you understand support and resistance and these become focal points now when we begin to look at a sequence of bars as we have here this is of course one of the pages we have in our courses that we teach from and we start looking at a group of different bars now we test our students because see we don’t want to get you folks trapped into thinking about all the different terminology now many of you’ve probably read a great number of Japanese candle books in the different pattern there’s all sorts of things like doji bars and hammers and inverted hammers and there’s of course dark cloud covers there’s dark cloud covers with a momma holding an umbrella with rain turning to sleet and soon snow you know what I’m talking about now some of those that I just mentioned are not true patterns because I know some of you’re writing those down saying I knew I was missing that one pattern it’s not important what the pattern is it’s more important to understand the psychology of what’s happening inside the bars in the pattern does that make sense everybody.

So once you can determine what the psychology of the bars are and what’s happening it’s more important you can identify that and then memorise every single type of description of a candle or pattern that candles create so in this case here would everyone tell me right now that number two is not bullish would you agree with me we test our students in our in our very beginning of our classes that is not a bull one the candles obviously this candle closed in the bottom twenty or thirty percent of its entire trading range and we put these tests in our courses so that we can get people thinking going hey Ron that’s not really a bullish candle and I go you’re absolutely right that’s what I wanted you to tell me.

I wanted you get the idea that the Bears started selling this down and it closed in the bottom percentage just as much as the Bulls didn’t really win this conclusively this is much more of a neutral candle I won’t go into the short side but over here on the bottom left would you folks here in the audience here in New York of course agree with me that number two and number three that that is not the case not that no one did not win those the Bears won this candle and the Bulls won this candle conclusively the Bears crushed this candle they won this candle they closed in the bottom two or three percent the Bulls won this candle and drove it all the way up to the top and I think you can see that so by just simply understanding these rudimentary things it becomes very much easier to be able to interpret candles I’ve done this at a couple of workshops here in New York.

I’ve done this online a few times so I’ll do it here just have a little fun and maybe get a laugh or two what’s seven times seven everyone right eight times eight right and louder twelve times twelve Oh with great Glee twelve times twelve what’s 29 times twenty-eight what nobody’s got it okay the point is that we went up in grade school with Flash Cards up to twelve times twelve and we got them very easily right and everyone would really enjoy is 12 times 12 because that’s the last one I had to learn I want to get it to the point to where I can hold up a flashcard and show you two bars three bars and you’re going to go bullish bearish need to get out think about getting out lighting up by position stay in the trade and by being able to make those associations like we did on flashcards with in a very short period of time I’m not talking years I’m talking about weeks to months you’ll be able to learn especially in easily just two and three bar patterns to where you’re investing in your trading will improve incredibly in fact if you were to get into a trade long right about where that one is and then the bar close near its top like it did right here at the very top of that bar would you be happy yes or no sure you would but what if the very next bar closed like this under the one and now you were slightly negative on the trade and you see this topping tail here and it closed in the bottom would you be at least somewhat worried yes or no yes you would and you should have your finger on the trigger you might consider maybe even reducing some of your position because don’t be list don’t be trying to go on hope and prayer your wishful thinking objectively you can see what people are thinking in the bars these bars folks are the cash register of the market Warren Buffett or anyone could very well be in these bars would you agree with me yes or no on that anything that’s happening at this moment in time when a bar is being formed is the cash register of the market so let me ask you another question okay when we start talking about the cash register market we have time and sales what makes up every one of the hundred and seventy indicators work we have moving averages we have stock active indicator which is the mom 3 we have the dad 17 we have the aunt no I’m just kidding about the last two I know you’re writing those down also thinking I knew I missed a couple what powers every single indicator of the hundred and seventy to make those lines form on your graphs what price and volume if without price and volume you will never get a moving average or any other indicator to work in existence so the sooner you can identify price and volume and understand the relationships between that the better you’re going to make your investment decision.

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Haroun Kola

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