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Market Mechanics Ep 6: Candlestick Patterns — Transcript

by Brad Goh (The Trading Geek) · 5,448 words · 868 segments · language en · Watch on YouTube

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0:00Price is the leading indicator, and the
0:02best way to truly understand price is to
0:05look at Japanese candlesticks. Most
0:08beginners, they look at candlesticks,
0:09but they do not actually know how to
0:11read them. They see green candles, red
0:14candles, big wicks, small bodies,
0:16engulfing patterns, dojis, and all of
0:20this like random stuff on the chart.
0:22But the truth is, every candlestick is
0:25actually telling a story. And if you do
0:28not understand that story, you're
0:30basically trading blind.
0:32As traders, we use candlestick charts to
0:35analyze and interpret price charts in
0:38the financial markets. To us, this is
0:41our key form of technical analysis. So,
0:44let's break it down in this entire
0:46lesson. I'm going to go through what is
0:49a Japanese candlestick, when you should
0:51use them, how to use them, and why you
0:54shouldn't just be blindly memorizing
0:56candlestick patterns. All right, I'm
0:58going to teach you everything I know
0:59about Japanese candlesticks.
1:01Now, here's what a candlestick is.
1:03A candlestick basically shows you what
1:06price did over a specific period of
1:09time. It tells you where price open,
1:12where price close, the highest price
1:15reached to, uh the lowest price reached,
1:18and it basically just tells you like who
1:21is in control of price.
1:23Each candlestick is basically a snapshot
1:25of price action over a certain time
1:28period. That time period could be the
1:311-minute, the 5-minute, the 1-hour, the
1:334-hour, the daily time frame, depending
1:36on the time frame in which you are
1:38looking at. For example, right now we
1:40are on the 4-hour time frame. So, each
1:43one of these candlesticks represents the
1:45price action that is going on for the
1:47past 4 hours. All right, so you can see
1:49this big bearish candlestick right here.
1:51That means that within this 4-hour
1:53candlestick, there is four times 1-hour
1:57bearish candlestick that was formed.
1:58Right? So, if you look at this right
2:00here,
2:01go to the one hour time frame, you can
2:02see 1 2 3 4 four one hour bearish
2:06candlestick forms a four hour bearish
2:09candlestick. And then you can see this
2:11four hour bullish candlestick right
2:12here. This is formed by
2:151 2 3 4
2:17Okay, my math sucks. 1 2 3 4 four
2:20candlesticks, right? So, these four
2:22candlesticks combined together it forms
2:25a four hour candlestick, right? So, uh
2:27if you look at a 15 minute time frame,
2:29this four 15 minute time frame
2:33candlestick right here, combine them
2:35together and you will get this one hour
2:37candlestick.
2:39So, candlestick allow us to know what's
2:41going on on the lower time frame itself
2:43without actually going down to the lower
2:45time frame. Right? So, like I said, it's
2:47a snapshot of the price action.
2:51Now, there are basically four parts of
2:53the candlestick. Okay? So, this is what
2:55we call the anatomy of a candlestick.
2:56Like, just dissecting the candlestick
2:58itself.
2:59You must understand that at any point of
3:01time, when a candlestick actually opens,
3:04right? So,
3:05it opens like let me just show you the
3:07live market condition right now. You can
3:09see this is a candlestick that is being
3:11opened. And when it opens, it opens in a
3:13horizontal line just like this. And if
3:15there is selling pressure, it's going to
3:18push price down and then it's going to
3:20start to create like this bearish
3:21candlestick to the downside. If there is
3:23buying pressure, it's going to push
3:25price up and creates this bullish
3:27candlestick to the upside.
3:29Okay, so in this case, you can see
3:31candlestick open just like this, like a
3:32horizontal line just like this, and then
3:36selling pressure right now is pushing
3:38price down. Okay, so this is the one
3:40hour candlestick that's being formed,
3:42and it was just created about nine
3:45minutes or so, give or take around nine
3:47minutes. And it opened somewhere around
3:49here. And because there's so many
3:51sellers in the market, it just keep on
3:52pushing price down. You can see it's
3:54just starting to go down even lower and
3:56lower and lower and lower. Right? So, if
3:59there's enough buyers later on, price
4:01could potentially move up and then the
4:03candlestick body could close right here
4:04instead.
4:05Let me just go back to the basics,
4:07right? Just to explain to you how the
4:10entire candlestick actually works. So,
4:12in this case, you can clearly see that
4:14this is the open price. In a bullish
4:17scenario, there's going to be buying
4:18pressure stepping to the market causing
4:21price to go up, to move up. So,
4:24eventually the candlestick closed
4:26bullish, right? And how do we know it
4:27closed bullish? We know when the close
4:29price is higher than the open price.
4:33This indicate to us that buying pressure
4:36caused price to came all the way up here
4:37and it closed just like this. And then
4:39on the other side, we got the bearish
4:42candlestick. A bearish candlestick is
4:43when the close price is lower than the
4:45opening price. Which tell us that there
4:48was selling pressure causing price to go
4:50down. As simple as that. And then that
4:54is the candlestick body, right? See this
4:55rectangle thing that you can see right
4:57here. This is the candlestick body.
4:59And you might observe that there is
5:01these two thin lines right here, right?
5:03At the
5:05higher side and also at the lower side,
5:07right? So, this is actually the upper
5:09wick and then this is the lower wick.
5:11The body shows you the distance between
5:15the open and the close. The wick shows
5:18you how far price moved before pulling
5:22back.
5:23Okay, so bear in mind that this is the
5:24close price.
5:26But then this
5:28shows us that at some point of time,
5:30price has literally went all the way up
5:32here before coming down and closing at
5:35this price point right here, leaving a
5:37trail behind which is our upper wick.
5:41And this candlestick also show us that
5:43at some point of time, price has went
5:44all the the down here, right? Came all
5:46the way down here to the lowest price
5:49before it went all the way up and
5:51closing at this price point, giving us
5:53our lower wick. Right? It basically show
5:56us how far price has moved before it
5:59starts to pull back and close at this
6:01price point.
6:02And if you look at this bearish
6:03candlestick right here, same exact
6:05thing. Open price, close price. This
6:08tells us that there was a lot of selling
6:09pressure causing price to come all the
6:10way down here.
6:11But while this candlestick was forming,
6:14at some point of time there was some
6:16buying pressure stepping to the market
6:18causing the price to get pushed all the
6:20way up here, giving us a high before
6:23sellers start to step into the market
6:24causing price to come all the way down,
6:26leaving us a upper wick, leaving us a
6:28trail. And cut later, it might
6:31potentially came all the way down here,
6:32came down to the lowest price leaving us
6:34a lower wick as well.
6:37So, a bullish candle, it close higher
6:39than it open, which signals that's
6:43buying pressure.
6:45A bearish candle closes lower than it
6:47open, which show us us that is selling
6:50pressure.
6:51Now, here's an important thing to note.
6:53A bullish candle does not always mean
6:57buy.
6:58A bearish candle does not always mean
7:00sell.
7:01It just tells you who had more control
7:03during that candle.
7:06So, once again, looking at the live
7:08price action right here, you can see
7:09this is the 1-hour candlestick that's
7:11being formed. And at this moment it's
7:13bearish, right? Open right here, price
7:16keep on coming all the way down here,
7:17you can see there's selling pressure in
7:19the market, which tell us that the
7:20sellers are in control of price.
7:23But it haven't closed yet. It requires
7:27around an estimate of around 47 minutes
7:3030 seconds before it starts closing. So,
7:33a lot of things can happen within these
7:34next 47 minutes. Within these next 47
7:37minutes you can get some buying pressure
7:39stepping to the market causing price to
7:41go up even higher. And then maybe the
7:43candlestick close bullish just like this
7:44instead. Right? So, this candlestick
7:47just tell us the price action that is
7:49going on within that period of time.
7:52Right? It just shows us the tug-of-war
7:53between the buyers and sellers.
7:57So, yeah. That's pretty much the anatomy
8:00of a candlestick. Uh basically, let's
8:03just to give you like a pro tip, look at
8:05the candlestick body. Right? If the
8:07candlestick body is big, big candlestick
8:09body, this means there's a lot of
8:11momentum. Small candlestick body means
8:13there's very little momentum. So, in
8:15this case right here, if you look at
8:17let's say this candlestick right here.
8:19Big candlestick body, right? Very big
8:21candlestick body compared to this
8:23previous candlestick right here.
8:25This tells us that there's a lot of
8:27buying pressure, a lot of buying
8:29momentum. So, as a result, we can expect
8:31this buying pressure to continue and
8:34indeed it did just that. Price just
8:35continued going up even higher.
8:38And then we also got a bearish candle.
8:40Right? So, let's take a look at this one
8:41right here. You can see this bearish
8:42candlestick have a big, strong body.
8:45Right? This body right here is
8:47significantly bigger than the previous
8:49candlestick right here, which tells us
8:51that there was selling pressure in the
8:52market and we can expect this selling
8:54pressure to sustain.
8:56Now, compare this to like maybe this
8:58little candlestick right here.
9:01Okay, this candlestick is very, very
9:02small right here. It's a very small
9:04candlestick body, which tells us that
9:06there is not much momentum, there's
9:08indecision in price. Right? There's a
9:11very less conviction in the market right
9:13now, which could potentially tell us
9:15that price is reversing or if there's
9:18sufficient momentum, price could just
9:19continue going up.
9:21So, when the body is large, it usually
9:23means that one side has strong control
9:26during that candle.
9:28When the body is small, it usually means
9:30there was more hesitation or balance
9:32between buyers and sellers.
9:35So, that's what the candlestick body
9:37tells you. And then you got the
9:38candlestick wicks, right? Which is once
9:40again, all the upper wick and the lower
9:42wick that you can see right here.
9:45When you have a very long upper wick
9:47like in this instance, this tell us that
9:50when this candlestick was forming, price
9:52got pushed all the way up, right? It
9:54pushed all the way up here.
9:56But then later on it got rejected,
9:58right? The sellers pushed price all the
10:00way down here and as a result the
10:02candlestick body closed somewhere around
10:04here.
10:06And if there's a long lower wick just
10:07like this, this tell us that price
10:10when this candlestick was forming got
10:12pushed all the way down here, but then
10:13once again got rejected by the buyers
10:15and the buyers come in, push price all
10:17the way up here. As a result the
10:18candlestick closed somewhere around
10:20here.
10:21So, when you have this long upper wick
10:24or lower wick, it usually means that
10:26there's a lot of volatility in the
10:27market. It usually means that there is a
10:30lot of price rejection or indecision in
10:34the market depending on the context in
10:37which the wicks are appearing in.
10:40So, once again, wicks just show you
10:42where price tried to go, but failed to
10:44hold.
10:46Okay? So, that is pretty much like
10:48everything you need to know about
10:50Japanese candlesticks on a basic
10:52fundamental level like the anatomy of
10:54the candlestick itself.
10:55Now, let's quickly go through this,
10:57right? Because this is what a lot of you
10:59guys might have seen if you've started
11:01trading. And that is the candlestick
11:03pattern cheat sheet.
11:05Now, a lot of conventional advice would
11:06tell you to go and memorize every single
11:08one of these candlestick pattern and try
11:10to spot those patterns in the market and
11:12then when they do appear in the market,
11:14just act accordingly. So, for example,
11:16if you see this inverted hammer, you
11:17should just buy. If you see this tweezer
11:20top or whatever, you should just sell.
11:22But, it's not as simple as that.
11:25The candlestick pattern
11:27is as important as the context in which
11:31the candlestick pattern appears.
11:34Right? So, if you see this bullish
11:36three-line strike, but the market is
11:39actually in a downtrend, what tends to
11:41happen is that after this candlestick
11:42pattern is formed, you should be
11:44entering for a sell instead of entering
11:46for a buy because the prevailing trend
11:48direction is actually bearish. So, I
11:51don't want you guys to just blindly
11:52memorize candlestick patterns.
11:54Instead, I want you guys to understand
11:57the relationship between the buyers and
11:59the sellers by analyzing the
12:01candlesticks.
12:02Right? By already understanding who is
12:04in control of price, whether the buyers
12:05or the sellers, whether demand or
12:07supply.
12:08And you do that by looking at the
12:11candlestick body and the candlestick
12:13wick.
12:15Okay, so next up, I'm going to go
12:16through like these golden rules of
12:17Japanese candlesticks, which will just
12:19fundamentally change the way you
12:21perceive candlesticks forever.
12:23Because trust me, in my first year of
12:25trading, I tried to follow the
12:27conventional path.
12:28I was sitting over here, and I was like
12:30trying to wrap my my head around all
12:32these like 30 different candlestick
12:34patterns, trying to memorize them.
12:37But it just didn't stuck with me. Like,
12:39yes, I could memorize this one or like
12:41this one, but like you're asking me to
12:42memorize 50 freaking candlestick
12:44patterns, that's like out of my world,
12:46right? I'm I'm not that smart, all
12:48right? I'm smart, but I'm not that
12:49smart. So, as a result, I just came up
12:52with like this own method of using
12:54candlestick patterns, and that is you to
12:56just observe the momentum and the
12:58pressure of the candlesticks just by
13:00looking at the anatomy of the
13:01candlestick itself. That tells me so
13:04much about the price action without
13:05needing me to memorize useless patterns.
13:09Okay, but if you want to like really
13:11just, you know, keep things simple for
13:13you, the conventional advice or the
13:15advice that I used to give traders in my
13:17first three years is to just stick to
13:20three candlestick pattern, right? It's
13:22to try to memorize just three. And for
13:24me, my favorite candlestick patterns
13:26last time was the bullish engulfing or
13:28the bearish engulfing candlestick
13:29pattern and the morning star and the
13:30evening star candlestick pattern and the
13:32three line strike candlestick pattern.
13:35All right, it's been so long since I
13:36even like look at this cheat sheet, all
13:38right? It's been ages. But yeah, this
13:41The reason why this candlestick pattern
13:43tends to work is because of really the
13:46momentum and the pressure. If you look
13:48at this bullish engulfing candlestick,
13:49look at the body. The bullish
13:51candlestick body is significantly bigger
13:54than the previous candlestick body. All
13:56right, the previous bearish candlestick,
13:57which tells us there's buying pressure
13:59and buying momentum. That is why bullish
14:01engulfing candlestick pattern tends to
14:02work. It's not because the textbook says
14:05so. It's because that this tell us that
14:08the buyers overpowered the sellers. Same
14:11thing with the morning star, right? With
14:13the morning star basically tell us that
14:14there's a bearish candlestick, a doji
14:16candlestick, which signal indecision.
14:19It does not really mean that price is
14:20going to go up or go down. It just
14:22signal indecision. And the next
14:25candlestick after the doji candlestick
14:26is a bullish candlestick, which tell us
14:28that
14:29the buyers have won the tug-of-war. The
14:32buyers have took back control of price.
14:34So as a result, price is most likely
14:35going to reverse to the upside. Same
14:37thing as the evening star, same thing as
14:38the bearish engulfing, which is like
14:40just the opposite. And I same thing as
14:42the three line strike.
14:44The reason why these candlestick
14:45patterns work is because of momentum and
14:47pressure. And that's what we're going to
14:49talk about next. Okay, so here's my
14:51golden rules of Japanese candlesticks.
14:54Like I said, do not just blindly
14:55memorize candlestick patterns.
14:57Understand how the candlesticks actually
14:59work. Why price move the way it does.
15:03And when you do, this is where you are
15:05able to really just observe
15:08the price action and trade with the
15:10institutions.
15:12So the first rule is candlesticks tell
15:14you everything about price action, which
15:16is who's in control of the market. At
15:18any given moment, if you look at a
15:20candlestick, like for example, if look
15:22at a live price action right now, I can
15:24straight away tell you that the market
15:26is actually bearish.
15:28Yes, because of the structure has just
15:29shifted bearish, but another reason is
15:31because if you look at the most recent
15:33candlesticks, price is
15:35bearish, right? There was a lot more
15:37bearish candlesticks than bullish
15:39candlesticks in the past few hours,
15:43which tell us that the sellers are in
15:44control of price.
15:45Or another example, like let's say we
15:47look at this price action right here.
15:51Anybody can know, like just tell that
15:54this is actually a uptrend, right? Clear
15:56as day, price is bullish. Why? Because
15:59if you look at the bullish candlesticks,
16:00there's a lot of momentum. There was a
16:02lot of bullish candlesticks, and not
16:04only were there a lot of bullish
16:05candlesticks, but the bullish
16:06candlesticks that was formed have a big
16:09body, have a very huge body right here.
16:12Right? That's what I always say, the big
16:14black candlestick, you know what I'm
16:15saying? The BBC. Okay, so that's how you
16:18remember it, all right? BBC. When it's
16:21BBC, big bullish candlestick, a lot of
16:24buying pressure. BBC, big bearish
16:26candlestick, a lot of selling pressure.
16:28That's it. Next up, you got the doji
16:30candlesticks, right? Like I said
16:32earlier, doji candlesticks signal
16:34indecision.
16:36Does not signal a reversal, it just
16:38signal indecision.
16:40Once again, here's where a lot of
16:42traders tend to go wrong. They assume
16:44that after a doji candlestick, price is
16:46just going to reverse.
16:48Let me just bust that myth. In this
16:51case,
16:52doji candlestick formed, but did price
16:54reverse straight away? No, it didn't.
16:56In this case, doji candlestick formed,
16:58right? This is not really like a doji
17:00candlestick, but like it's still kind of
17:01like a doji, it's kind of shaped like a
17:03doji candlestick. In this case, was
17:05there reversal? No. So, once again,
17:07don't just blindly follow what the
17:09conventional trading advice tells you to
17:11do so.
17:12Understand that doji candlestick just
17:14signal indecision, which means neither
17:17buyers nor sellers has gained control of
17:19the market. So, what you want to do is
17:22to focus on what happens after the doji
17:24candlestick. Because that will tell you
17:26a lot more. What you do want to do is to
17:29focus on the context, the location in
17:32which the doji candlestick appears.
17:35So, for example, in this case,
17:38price was heading down. Boom.
17:40We got this
17:42candlestick right here with a long low
17:44wick. This is the first indicator that
17:45tell us that, you know what, buying
17:47pressure is stepping into the market
17:48pushing price up. The long low wick. And
17:51then followed by a doji candlestick.
17:54Doji candlestick once again just signal
17:56indecision. And it could potentially
17:57tell us that these sellers is losing
18:00momentum. Right? The sellers are getting
18:02kicked out of the market by the buyers.
18:04Because the first sign was that we got a
18:05long low wick right here, which
18:07indicated buying pressure. The next sign
18:09was that we got a doji candlestick,
18:10which tell us that there was indecision.
18:12Because if the sellers wanted to take
18:14control of price, price would just
18:16continue going down with a lot of
18:17bearish momentum and pressure.
18:20But that did not happen.
18:22The third confirmation came when we got
18:23a bullish engulfing candlestick, a big
18:26bullish candlestick,
18:28right after the doji candlestick, which
18:30signaled to us buying momentum has
18:32entered into the market. Buying pressure
18:34has entered into the market. In fact,
18:37this was so good. It was so bullish that
18:40it didn't even have a wick.
18:42No upper wick, no lower wick, just a
18:44candlestick body just like this,
18:47which tells us a lot of buying pressure
18:48momentum.
18:49And just as expected, after this is
18:51formed, prices continue bullish.
18:54So, that's the added tip that I want to
18:56give you. Is don't just focus on the
18:57doji candlesticks, but focus on the
18:59context in which it appears in and what
19:02it does after it appears in the market.
19:05Next one is the larger the candlestick
19:07body, the more momentum or pressure
19:08there is.
19:10So, once again, I already covered this
19:12briefly just now. Look at this big
19:15bearish candlestick right here. Look at
19:17this BBC. Is there a way
19:20for price to actually go bullish after
19:22this BBC occurs?
19:24It might, but like
19:26the BBC is just going to dominate. It's
19:28just going to dominate. You know, it's
19:30just going to dominate. So, as a result,
19:32after the BBC is formed, price just
19:34continue bearish, it just continue going
19:35down. Because that's way too many
19:38selling pressure and selling momentum in
19:41this candlestick right here, within this
19:4315 minutes over here.
19:45So, just like gravity, right? And using
19:47the laws of physics, when there's when
19:49something have a lot of momentum, it's
19:52just going to continue to just collapse
19:55with ease.
19:57Just try rolling a ball down a slope.
20:00Right? It might requires a lot of, you
20:03know, pressure, a lot of force to get
20:05the rock up the slope, but once this
20:09rock gets up the slope and you push the
20:11rock down the slope, it starts coming
20:14down and you will start to see it starts
20:15getting momentum, the the pressure
20:18starts the the like pressure or whatever
20:20the physical terms is, starts building
20:22up, the momentum starts building up and
20:23the rock grows faster and faster and
20:25faster and faster.
20:26It's the same scenario right here. Okay,
20:28so after you see this big bearish
20:30candlestick over here, what happens that
20:32there was a lot of selling momentum
20:33causing price to just collapse like
20:35crazy. Until that the momentum fades
20:37away, until the rock comes to a stop.
20:40And then the buyers took back control of
20:42price again. Once again, the market
20:44moved back to a phase of balance before
20:46the next imbalance occurs.
20:50And we got a big bearish candlestick
20:52that says that there was a lot of
20:53momentum, and what happens after that is
20:58annihilation, destruction,
21:01collapse, right? Where price just
21:02continue crashing down.
21:05The next tip is candlesticks on the
21:07higher time frame matter than more than
21:09the lower time frame. So, if I see like
21:12a
21:13let's say like a
21:14on the daily time frame, right? Let's
21:16say I see this big bullish candlestick
21:19occurs on a daily time frame. I know for
21:22a fact that there's a lot of buying
21:24pressure and momentum.
21:26Compared to if you see this exact same
21:28bullish candlestick on let's say the
21:295-minute time frame like over here,
21:32it's less significant.
21:35Okay, it's less significant because this
21:37just tell us that within 5 minutes the
21:39buyers,
21:40you know, overwhelmed the sellers.
21:43But, this right here tell us that within
21:45a day the buyers overwhelmed the
21:48sellers.
21:49Which means that this move right here is
21:51a lot more significant
21:53than the one that we have right here.
21:55And therefore it's a lot more valuable,
21:57which means that it's a
22:00it's a lot more like worthwhile, right?
22:02What I basically mean by that is that
22:03it's a lot more stronger. So, you can
22:05see the exact same candlestick pattern
22:08on the 4-hour time frame and it might
22:10work in the way you envision it work,
22:14but if you see the exact same pattern on
22:15the 5-minute time frame, it might not
22:17work because the one that is on the
22:194-hour time frame is just a lot more
22:20significant.
22:22So, candlesticks on a higher time frame
22:24matter a lot more than the lower time
22:25frame itself.
22:27And fifth tip is do not just rely on
22:30candlestick patterns without context.
22:32Like I said, it's all about context.
22:33It's all about location. It's all about
22:35timing. It's all about your bias.
22:37So, you want to make sure that you are
22:39combining all the market mechanics
22:41concepts that we're going to cover
22:43with candlestick patterns. Right? Don't
22:45just use candlestick pattern alone. It's
22:48not the best confluence out there. You
22:50need multiple influences. You need
22:52multiple confirmations to support your
22:54trade idea, to support your trade bias.
22:57So, use your structure, right? So, if
23:00price is actually creating a bullish
23:01break of structure right now and this is
23:04where I know for a fact that okay,
23:06bullish break of structure over here.
23:08Okay? And then we got a bearish
23:10candlestick after the break of
23:12structure. What does this tell us? This
23:14tell us that price is potentially going
23:15to start pulling back.
23:17Okay? And then price is going to start
23:18pulling back and then once price comes
23:20down here, starts going up, we can
23:21expect price to just continue bearish
23:23creating a new lower high and then
23:24eventually comes down to the demand zone
23:26that we have right here. Which is
23:28another concept that we're going to
23:29cover very very soon. And then you can
23:31see once price is approaching this
23:32demand zone, ideally, I want to see some
23:35sort of big bullish candlesticks.
23:38Right? Or I want to see like this
23:40reversal candlestick pattern right here
23:43to signal to me that the market is
23:45actually respecting this demand zone,
23:47the pullback is over and right now we're
23:48just going to shift bullish.
23:50So use all the weapons in your arsenal
23:52to develop a trade idea, to develop a
23:55trade bias.
23:56And last tip that I have for you is to
23:58compare the size of the candlestick body
24:00to the size of the wick.
24:02If you have a candlestick body,
24:05which is a lot bigger than the wick
24:07itself, once again, what does this tell
24:10you?
24:10This tell you that there is a lot of
24:13buying pressure, a lot of buying
24:14momentum, like in this case right here.
24:17However, if you have this candlestick
24:19right here with a very small body but
24:21very long upper and lower wick, right?
24:24In this case, it's like 20% body but 80%
24:28wick. Well, in just now, this is about
24:3190% body and 10% wick.
24:33Right? So this tells us that there is
24:36very less momentum, very less pressure.
24:39There's a lot of uncertainty in the
24:40market, which is why, you know, price
24:42came all the way down here, got
24:43rejected, price went all the way up
24:45there, got rejected again. Right? So
24:47once again, it's the tug-of-war dynamic
24:48that's going on right here. And as a
24:50result, this tells us that there's a lot
24:52of indecision, a lot of uncertainty,
24:53which means that at any given moment,
24:56price could just reverse.
24:58And it did exactly that.
25:01Right after this candlestick was formed,
25:03reverse. And what candlestick pattern is
25:04this? This is actually your good old
25:07evening star candlestick pattern, or at
25:10least a variation of it.
25:12And notice what happens after this
25:14candlestick was formed.
25:16It was followed by a bearish candlestick
25:19with
25:2090% body and 10% wick.
25:23Big bearish candlestick body which
25:25signaled to us a lot of selling
25:26pressure, a lot of selling momentum.
25:29And just as expected, right after this
25:31candlestick body is formed, price has
25:32continued collapsing.
25:34This is the power of just understanding
25:37candlestick pressure and momentum.
25:39When you do, you can essentially bend
25:42the market to your will. Not really bend
25:44the market to your will, but like you
25:46know what I mean. You can essentially
25:47just observe what's going on in the
25:50market and just trade with it rather
25:53than against it.
25:55And to me,
25:57this is such a beautiful thing, because
25:58I really believe that
26:00candlesticks are the heartbeat of the
26:01market.
26:05You know, dum dum dum. You you can just
26:07hear the heartbeat of the market. And
26:09when you can hear the heartbeat of the
26:10market, you can trade with it.
26:13Right? Because the market is always
26:15telling you a story. All you got to do
26:17is to listen.
26:20It's an art, man. It's a bloody
26:21masterpiece.
26:24So, that's everything I wanted to teach
26:27you guys about Japanese candlesticks,
26:29right? I know you probably expected me
26:30to delve deeper into freaking
26:32candlestick patterns, but that's just
26:33not how I operate. Because in my first
26:35year of trading, I did that, right? I've
26:37tried that. I've tried all the
26:39candlestick patterns in the world, and I
26:40realized that over time, the candlestick
26:43patterns, it works to a certain extent.
26:46But what's more important is, once
26:48again, the context of the market in
26:49which you're applying them in. Because
26:51the context of the market will determine
26:53whether the candlestick patterns
26:55work in the way where it's supposed to
26:57work.
27:00Candlesticks, all they do is to help you
27:02read price. Help you listen to the
27:03heartbeat of the market. They do not
27:06replace market structure. They do not
27:08replace liquidity concepts or timing.
27:10You still have to understand all of
27:12these market mechanics concepts so that
27:14you can have the full picture.
27:16This is just a piece of the puzzle
27:18itself. It's not the full picture yet.
27:22Okay? So,
27:24yeah, do not just memorize candlestick
27:26patterns without any context, right?
27:28Don't just enter for a buy because you
27:29see a bullish candlestick. Don't just
27:31enter for a sell because you see a
27:32freaking bearish candlestick.
27:35Don't just think that all you need to do
27:37is to just memorize the candlestick
27:38patterns.
27:40I really wanted to like just, you know,
27:41share with you guys like everything that
27:43I wish I knew about candlestick patterns
27:44because
27:46I have your best interest at heart. Like
27:48when I create these lessons, all I'm
27:49doing is that I'm speaking to my younger
27:50self. If I knew all of these concepts
27:53back in my first year of trading,
27:55I wouldn't have blown seven accounts. I
27:57wouldn't have failed six freaking
27:59funding challenges. I wouldn't have lost
28:01like $10,000 of my life savings.
28:05But now looking back in retrospect, I
28:07realize that I have to do all of that. I
28:09have to go through the hardship, the
28:11trials, the tribulations
28:13for me to become the man I am today. For
28:16me to learn that
28:17all of these concepts
28:19is actually much more useful if you
28:22apply them in this manner.
28:24All of the losses were just
28:27allowing me to, you know, learn these
28:29lessons so that I can pass on these
28:31lessons to you.
28:33And I think that's the most beautiful
28:35thing about trading because
28:37yeah, man, like
28:40it means so much to me, man, to be able
28:42to like just create these free lessons.
28:43I don't feel like this is work. I don't
28:45know what you guys are thinking, but
28:46like when I speak, I speak with
28:47conviction. I speak with passion because
28:50I genuinely love this game. I really
28:52believe that trading's an art. And if
28:54you really just, you know, view it as an
28:57art, you will see how beautiful the
28:59market actually is.
29:01It's really just a representation of the
29:03universe.
29:05But that's another topic for another
29:06day.
29:07So,
29:08remember, the goal here is not to
29:10memorize freaking candlestick names or
29:12patterns
29:14or to like, you know, be one of those
29:16guys where you
29:17buy like a
29:19mouse pad where it has all the
29:21candlestick patterns.
29:22You look like a freaking weeaboo when
29:24you have that, right? Don't be a geek,
29:25okay? Even though I'm trade the trading
29:27geek.
29:28Instead, the goal here is to understand
29:30what price is actually communicating.
29:33Candlesticks help you read the momentum,
29:35the rejection, the indecision,
29:38the pressure, the intent.
29:41And once you understand that, the chart
29:43becomes much more easier to interpret.
29:46So, yeah.
29:47To keep things simple, every candlestick
29:50tells a story. It shows you where price
29:53open, where it's going to close,
29:57where it went to
30:00using the wicks, how high it went, how
30:02low it went.
30:03And the candlestick body tells you who
30:05is in control of price. And the wicks
30:08tell you where price was rejected.
30:11And the real edge comes from reading
30:13those candlesticks in the right context.
30:18So, with that being said, I look forward
30:20to teaching you guys more of these
30:21awesome market mechanics concepts. And
30:23as always, remember, you're just one
30:26trade away. Mwah.

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