Candlestick Patterns Don't Work (Unless You Do This) — Transcript

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1. 0:00This is a candlestick. And if formed in
2. 0:02a specific formation, it can tell you a
3. 0:04story of what the market is planning to
4. 0:06do next. But what if I told you
5. 0:09everything you know about candlestick
6. 0:10patterns is a lie. Hammers, dogeis,
7. 0:13engulfing candles, all of it. None of
8. 0:15this will work unless you pair it with
9. 0:17this secret trick. You see, most retail
10. 0:19traders treat candlestick patterns like
11. 0:21cheat codes. They grab their little
12. 0:23candlestick pattern mouse pads that they
13. 0:25bought on Amazon and blindly look at
14. 0:27trades with the same chart pattern. And
15. 0:29while yes, candlestick patterns can be
16. 0:30used for predicting price, a lot of
17. 0:32people use them completely wrong. They
18. 0:34see a bullish engulfing candle and they
19. 0:36think, "Great, what a great time to
20. 0:38buy." But then the price tanks. But what
21. 0:40if I told you there's a strategy you can
22. 0:42execute in order to know when this was
23. 0:45about to happen. Every candle you see is
24. 0:47one of these three types of candles:
25. 0:49Indecision candles, control shift
26. 0:51candles, and strength candles. Let's
27. 0:53start with the most powerful one, the
28. 0:55strength candle. These candles have
29. 0:56large bodies and small wicks. This is a
30. 0:59strength candle and shows that buyers or
31. 1:01sellers are in complete control at this
32. 1:04time. But this candle can get even
33. 1:06stronger. Oh my god. If a strength
34. 1:09candle is printed with a large body and
35. 1:11no upper wick for a bullish candle, this
36. 1:13is an extremely strong candle as it's
37. 1:16showing that buyers had absolutely no
38. 1:18resistance from sellers at this point.
39. 1:20It's the exact opposite for bearish
40. 1:22candles. If the candle has a large red
41. 1:24body with no lower wick, that shows
42. 1:26sellers had no resistance from buyers at
43. 1:29this point. Now, these candles are
44. 1:30pretty rare in the market, but if seen,
45. 1:32it shows extreme buyer or seller
46. 1:34control. But just like most things in
47. 1:36life, size matters. For example, you
48. 1:38could get this strength candle in
49. 1:40different sizes. Here we have four
50. 1:41examples. And all of these examples are
51. 1:44strength candles with uninterrupted
52. 1:46buying. But the largest strength candle
53. 1:48is the strongest and the best indication
54. 1:50that buyers are in control. Even though
55. 1:52candle number four is still a strength
56. 1:54candle, it's a lot weaker indication
57. 1:56than candle number one. Large strength
58. 1:58candles show massive buying, small
59. 2:00strength candles show less aggressive
60. 2:02buying. But what happens when that
61. 2:04control suddenly shifts. That brings us
62. 2:06to candle number two. This candle shows
63. 2:08who's losing the battle and who's about
64. 2:10to take over. These are also called
65. 2:12control shift or reversal candle. Candle
66. 2:14wicks show rejected price action. So if
67. 2:16you have a large upper wick that shows
68. 2:18buyers tried to move the price up but
69. 2:20got rejected and sellers took over and
70. 2:23brought the price down. These control
71. 2:25shift candles have long wicks with small
72. 2:27body. For this candle, the body of the
73. 2:29candle is pretty irrelevant. It doesn't
74. 2:31matter if the candle's green or red.
75. 2:33What tells you the real story is the
76. 2:35wick. So oftent times these candles can
77. 2:37show reversal points. With candles
78. 2:39showing large lower wicks, we can expect
79. 2:41price to move up. If we see candles
80. 2:43showing large upper wicks, we can expect
81. 2:45price to move down. Now, when no one's
82. 2:47in charge, the candle looks very
83. 2:49different. That brings us to candle
84. 2:51number
85. 2:53three. This candle means no one's in
86. 2:56control. An indecision candle looks like
87. 2:58this. They have wicks on both sides with
88. 3:01small bodies. They show equal effort
89. 3:03from both buyers and sellers, but no
90. 3:05real progress. Now, there's a lot of
91. 3:07different ways this can look. It could
92. 3:09look like this, this, this, or this. All
93. 3:12of these are indecision candles. Main
94. 3:14thing you have to remember is there's a
95. 3:15small body with equal wicks on either
96. 3:18side. People often call these dogeis,
97. 3:20but these candles usually appear before
98. 3:22major breakouts or reversals because the
99. 3:24market is trying to decide what it wants
100. 3:26to do next, but hasn't completely
101. 3:28decided on which way it wants to go yet.
102. 3:30You should never trade purely based off
103. 3:32these candles because this candle
104. 3:34doesn't tell us who's in control. But
105. 3:36when paired with this next candle, that
106. 3:38completely changes everything. For
107. 3:40example, if an indecision candle is
108. 3:43printed, but then directly after a
109. 3:45control shift candle is printed, this
110. 3:47shows us that buyers have won in the
111. 3:49indecision battle and we can wait for
112. 3:51price to do a pullback to this
113. 3:52indecision candle and enter here. You
114. 3:55can also use it as a clear reversal
115. 3:57point. For example, price drops strong
116. 3:59down to this area of demand, but right
117. 4:01when it reaches it, some indecision
118. 4:03candles showed up showing that price is
119. 4:05hesitating. And if paired with a
120. 4:07strength candle, it can show buyers are
121. 4:09starting to step in. But all of this
122. 4:11began with the indecision candle showing
123. 4:13signs of slowing down the sellers. So
124. 4:16let's put all we've learned to the test
125. 4:18and do a real life chart example. But
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147. 5:08use my link. You're welcome. Now, let's
148. 5:10take all three candle types and drop
149. 5:12them into a real trading example. So,
150. 5:15here we have some price action forming.
151. 5:16We started with a slight downtrend, but
152. 5:18if you look closely, something very
153. 5:20interesting is happening. During this
154. 5:22downtrend, we got three indecision
155. 5:24candles showing price is hesitating at
156. 5:26this price and doesn't know whether it
157. 5:28wants to go up or down from here. One
158. 5:30key thing to note though is that this
159. 5:32red candle has a large lower width,
160. 5:34meaning sellers tried to get the price
161. 5:36lower, but buyers stepped in and brought
162. 5:38the price back up. Which means buyers
163. 5:41are showing interest at this price
164. 5:42level. After this, price prints a
165. 5:44strength candle showing buyers are
166. 5:46showing massive interest now. So, we can
167. 5:48expect price to start heading upwards
168. 5:50from here. Price does exactly as we
169. 5:52expect and does a sharp upwards move,
170. 5:54printing multiple strength candles.
171. 5:56Another key thing to note, if you take a
172. 5:57close look, it took a while for sellers
173. 5:59to get the price down to here. But when
174. 6:01the buyers stepped in, they erased all
175. 6:03of that work that the sellers did within
176. 6:05a couple of candles. So, in essence, it
177. 6:07took sellers 22 candles to get down to
178. 6:10this point, while the buyers did the
179. 6:12same amount of work within four candles.
180. 6:14So, that's very important to understand.
181. 6:17So knowing that buyers are showing more
182. 6:19strength, we can expect the buyers to
183. 6:21continue this control and keep moving
184. 6:23the price upward, which is exactly what
185. 6:25happened. Since price started a strong
186. 6:27upwards move from this point, we can
187. 6:29call this area our area of demand. We
188. 6:31can mark this area of demand by marking
189. 6:33the low of the candle that started that
190. 6:35move to the high of that same candle.
191. 6:38This is our area of demand and shows
192. 6:40buyers are starting to get interested
193. 6:42once price reaches this area. So we'll
194. 6:44also keep that in mind for later. The
195. 6:46price ends up moving up a bit more and
196. 6:48then this candle gets printed. A red
197. 6:51control shift candle with a large upper
198. 6:53wick. This is saying buyers try to raise
199. 6:55the price higher but sellers came in and
200. 6:57brought the price back down showing
201. 6:59sellers have control up here. Directly
202. 7:01after that, we have a red strength
203. 7:03candle, meaning sellers are confident at
204. 7:06this price and are ready to bring the
205. 7:07price back down, which is exactly what
206. 7:09happens. Now that we have a strong move
207. 7:11to the downside, we can mark our area of
208. 7:13supply. To do this, we find the start of
209. 7:15a strong move downwards and mark the low
210. 7:18to the high of the candle that started
211. 7:20this move. This is our area of supply
212. 7:22and shows that sellers started to take
213. 7:24control once price reaches this area.
214. 7:27So, we'll also keep that in mind for
215. 7:29later. Price continues to move down a
216. 7:31bit from here. So, now we have this
217. 7:32setup and this chart is telling a very
218. 7:35clear and interesting story. First, look
219. 7:37at the speed the buyers got the price
220. 7:39up. They got the price up extremely
221. 7:41quick and within only a couple of
222. 7:42candles, while the sellers still got the
223. 7:44price back down, but the move is much
224. 7:46slower and took them a lot of candles to
225. 7:49get the price back down. So, right off
226. 7:51the rip, we can see the buyers have more
227. 7:53control during this time. Another key
228. 7:55thing to note, price has just hit our
229. 7:57area of demand, which like I said
230. 7:58before, a massive amount of buyers
231. 8:00stepped into this area before, and we
232. 8:02can expect them to do the same thing
233. 8:04here. Another key point is while
234. 8:06touching this area of demand, a green
235. 8:08control shift candle was printed.
236. 8:10Meaning sellers tried to drive the price
237. 8:12down below our area of demand. But just
238. 8:14like before, buyers stepped in by the
239. 8:16masses and took control and drove the
240. 8:18price back up. Not only that, but after
241. 8:20this control shift candle was printed, a
242. 8:23green strength candle was printed
243. 8:24directly after, showing even more signs
244. 8:27of buyer momentum. So now it's pretty
245. 8:29clear that buyers have complete control.
246. 8:31So now we have to take advantage of this
247. 8:33and find a place to enter. To do this,
248. 8:35we're going to wait for price to come
249. 8:37back down to our control shift candle,
250. 8:39which is exactly what happened. Not only
251. 8:41that, it printed another control shift
252. 8:43candle, which is another great sign. We
253. 8:46enter once price hits our control shift
254. 8:47candle, set our takerit at the area of
255. 8:50supply where sellers started to take
256. 8:51control, then set our stop-loss right
257. 8:54below our original area of demand. With
258. 8:56this setup, there's no guessing. We have
259. 8:58analyzed the chart and found areas where
260. 9:00buyers and sellers have complete
261. 9:02control. And just like that, price hits
262. 9:04our takerit just like we expected. But
263. 9:06with all that said, there's a key thing
264. 9:08you should understand. You should never
265. 9:09enter purely based on a candle. For
266. 9:11example, you shouldn't enter purely just
267. 9:14because you see a green strength candle.
268. 9:16That will not work in the long run.
269. 9:18Instead, use these candles as like a
270. 9:20book telling a story. You need to find
271. 9:22multiple correlations and find areas
272. 9:24where buyers and sellers show complete
273. 9:27control based off their candlestick.
274. 9:29Once you find that, you can easily
275. 9:30identify the zones where buyers are
276. 9:32likely to win and where sellers are
277. 9:34likely to win. Implement this in your
278. 9:36trading and you will instantly see your
279. 9:38take-profits getting hit way more often.