09/30 – Candle stick patterns that matter

Started my day trading career with Tim Sykes and when I wanted to learn more, I joined Investors Underground. The DVD’s that helped me the most were Tim Grittani’s Trading Tickers and Nate Michaud’s Tandem Trader.  Software that has helped me in my early years was: Trade Ideas software. Now I use FINVIZ. Click on the highlighted links for more details. For my main page, please click here: Day trading for beginners


 

An often overlooked part of trading is how to interpret candle stick patterns. There are a few basic pattern I look for when entering a trade. As I am mostly a short biased trader, keep in mind that this post will have more short setups, then long setups.

The first thing I look for when the marker opens are 4 setups.

1). Double top

Double top

2). Double bottom

double-bottom

3). higher low and lower high

Display-1-Chart-showing-Up-and-Down-Trends

The main reason I look for these setups is to analyse any potential reverse in trend. I set my stop either at a top or bottom. Mostly not at a daily high or low, but near the next best high or low. Stocks seem to spike near the daily highs and lows and that will trigger your stop. When she has been triggered, canceling a stop loss cannot be done. This means, if a ticker jumps 10 cents and holds, your position will be liquidated at what ever price the ticker is at that moment!

Risk management is important too! So always calculate risk into your trading plan!

When looking at these patterns, you need to take volume into account too. Are they moving on low volume, then there is a bigger chance the reversal will not happen. Are they working on high volume, but the stock does not move. There is a big chance a secret seller or buyer is collecting shares. This means that a ticker will break out and find resistance or break down and washout when key support fails.

The next step is to recognize a certain candle stock pattern. There are a lot of patterns out there and most of them are crap. Stocks move too fast to make anything out of what is happening and price action is emotions too, so a lot if candle stick patterns is nothing more then panic or hopeful thinking.

But there are a few important candlesticks that are important:

Candlesticks 2018

The first thing any new trader should understand is what a candle stick actually is. A green candle is a candle that opened lower and closed higher. this means that the top wick is selling and the wick at the bottom is buying. For red candles it is the opposite, the candle opened higher and closed lower then the opening price. The top wick is selling and the bottom wick is buying.

My favorite candle stick to sell/short into is the grave stone candle. This means that traders are selling into spikes, keeping the price down. At the top of a chart this might even mean a stock will reverse. You can look for confirmation when a top wick touches key, previous day, resistance. Set your stop near the top (not at the top!) or preferably  the next best resistance level on a lower high.

My second favorite candle sticks pattern is the morning star and evening star pattern. See here: Candlestick-Pattern-Evening-Star-2

these happen more often and are easier to manage. I usually plan these trades the same as above.

For me, candle stick patterns add to my overall strategy, but are not absolute. They should add to your story and confirm a certain pattern or trade plan. You need to build onto your trade plan, with as much conviction as possible! I also use the 20SMA too. Sometimes you see whole crowds following this simple moving average! So trading based on that also helps you manage your trade.

The best tip I can give you is to always trade careful, simple and fill of conviction. Consistency comes from comfort in a trade, conviction and planning. Again, trading is by all means NOT absolute. The market is volatile. As an example, I was stopped out by a huge buyer, who bought 150K shares at market and totally smoked me out of my position. That happens and is part of trading.

I would also like to thank my trading friends and followers for all their support. You should also surround yourself with people who support you. And don’t be fooled by people their life style. Keep it simple, pay off that mortgage or buy a house bare cash. You want to be independent, don’t you? Pay off that debt and don’t be a slave to society! It is your life and make the best of it!

SERVICES THAT CAN HELP YOU

For trading large and mid caps is hot business, Tandem Trader offers some insight on how to trade them.

Kindly click the following link here for more info on Tandem Trader:

Tandem Trader DVD

Also, if you are interested in short selling, you should check out Trading Tickers, which contains two important strategies 1). shorting parabolic moves and 2). buying breakouts.

You can find it by clicking the following link:

Trading Tickers

I hope you enjoyed this blog entry! As always, feel free to share this post!


If you are interested in Investors Underground and would like to learn more, please click the link here: Investors Underground.

 

 

 

%d bloggers like this:
search previous next tag category expand menu location phone mail time cart zoom edit close