A Few tips On How To Catch The Trend On The Forex Charts

Hello and welcome to another edition of the bulls  and the bears. Today I am going to show you a few tips on how to catch the trend on the forex charts. As I indicated in one of my earlier articles,What is Price Action Trading? no magic indicator, fancy robot,or any snazzy software can help you identify the trend. The forex market pretty much has a mind of its  own. It can turn on you  the same way when lightning strikes. So  the best thing you can do is to look out for the most obvious direction the market ie to take.

Now some of you are probably going like”How can I tell which direction the market is going?” Well you employ a concept aptly called TLS. Basically you  employ a sweet cocktail of trend analysis. Let’s  be clear: Weare not going  to learn how to trade a trend here(You can catch that on Trading Trends With Price Action Analysis).We are merely going to figure out how to catch the most obvious direction the forex  is taking.. We will start with the less complicated techniques and then work our way  to the advanced ones.

First:

Your Price Chart Should Be Free of Indicators  

If you want to catch a   trend without pulling your hair out, just observe a price chart free of indicators.You need to understand that trend identification is not rocket science. You only need to  keep it as simple and sweet possible.  One way of doing that is  watching a naked price chart free of those scary-looking tools called  indicators. Probably the most important  trend to keep your eye on is the daily chart trend. And by the way,you will be employing both short-term and long term analysis.

There is one important question you need to ask yourself when doing this analysis, And it is “What is the chart looking like between the last three months and two years? This is important because this give you a  clear idea of where the chart is headed. And you make sense of this pattern in terms of its movement from left to right on the chart. Now if that doesn’t pan out, just pull up a daily or weekly chart and ask yourself a very important question: Is this chart falling or rising? No need to  sweat the technique on this one.

Let look at the price action of EUR/GBP pair

Image result for forex - identifying trend on price action chart

 

It’s pretty obvious that the overall trend is on heading upwards. However, take a close look at the countertrend retraces or pullbacks within the uptrend.  Check out How to Trade 50% Retracement Strategy with Price Action Analysis

Next Up:

Look For Swing Highs and Lows

Look for the most obvious swing highs and lows. One thing about trends on the markets, is that they leave swing highs and swing lows in their trail. Ever seen jet stream coming out of the exhaust of an airliner? That’s what it looks like when trends leave behind swing highs and lows. The sing highs and lows give you a clear idea which direction the market is trending. Let’s take a look at  a swinging illustration using the EUR/USD pair.

Image result for forex - swing highs and lows on price chart

As  you can the red labels represent the highs and the lows in the uptrend. You can see the swing lows  form a staircase as the trend rises. However, if it were a downtrend, you’d be focusing on the highs instead. In this case the Highs will be creating a staircase in the opposite direction – the downside.

Map Out Your Higher Highs and  Higher Lows, and Lower Highs Lower Lows

Now that you have marked the swing points on your chart, you can now ascertain whether the market is HL,HL or LH and LL.   You should be able to spot the obvious pattern of HH and HL for the uptrend and LH and LL for the downtrend. Let’s take a look at NZ/ USD pair.

Image result for forex - hh hl and lh ll

Voila! You see all the Highs and lows nicely layed out in the price action. Even better the uptrend is already in place. So you shouldnt have any problem identifying the highs and the lows. If you want to learn some more about hiighs and lows,look up Do A Little Swing Trading and Trade Trends With Price Action Analysis.

Next Up

Do You See Price Action Signals Forming?

You need to check whether there are price action signals forming on the  chart. That should tell you   which direction the chart is going.If you keep getting persistent signal failures that should tell you that the market is changing direction. Let’s take a look at such an illustration using the USD CHF pair.

Now this image shows a double bottom pattern as indicated by the blue lines.  Jus so you know the double bottom pattern is a bullish reversal pattern which takes shape once the bears run out of steam. The neck line, labelled in pink represents the price confirmation signal. The green circle represents price breaking the neck, which confirms the beginning of the bullish trend.

However, the price action does an unexpected 360, initiating a strong bearish move. This represents the price signal failure that I mentioned earlier. The  bears are basically saying”Not so fast we’re taking over.”  The moral of the story is  t thathe failure of this signal should clue you in as to a trend reversal about to take place.  For more information on how to separate good price signals from bad price signals, look up Price Confirmation Signals:Weeding The Chaff From The Good. And if you want to know about the double bottom pattern qand other chart patterns, Look up Trading Forex Chart Patterns Part II. You’d be better served looking up Part I also.

Look Out For Change in Trend Direction

Probably the most important factor you want to concentrate on is a change in the market trend direction. You want to pay particular attention to the swing highs, but first start with the swing lows. Why? Because, not only will you catch the overall trend, but through the price action, you should be able to tell whether the trend is holding or not.

Let’s say you have a series of Higher Highs and Higher Lows in an Uptrend. When you see price  break down past the previous swing low, it;s the strongest signal that the bulls are running out of breath. I’m sure you know that the downtrend is made up of Lower Highs and Lower Lows. So conversely when price  breaks above the previous low, it should tell you that the bears are running out of breath. In other words, the downtrend is coming to an end. Let’s take a look at  a typical change in trend  using the EUR/USD pair.

Image result for forex - Change in Trend Direction

This is a typical example of a changes in trend direction on the chart.  As you can see on the chart, the uptrend starts strong, and then runs out of steam, due to price breaking down at the previous swing low.  It’s the same situation with the downtrend.The bears start strong and then run out of steam because price breaks down at the previous swing high.

That’s  a wrap for ”A Few tips On How To Catch The Trend On The Forex Charts”   As you can see,  it’s not that complicated. Once you master the art of identifying the trend/direction of a market then you look for a signal or key level to make your entry.Just remember that the market does have a mind of its own, so you will be better served to ride with it.

Till then take care.

Looking To Join The Forex Trade Gravy Train?

If you’ve stumbled in here looking to join the forex trade gravy train, here is what you need to do . First,  look up  Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis. And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

Wanna Subscribe to My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

P.S. if you want to know everything there is to bene know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life. It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including setting your level and margin), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading e-book.

 

 

 

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How To Create Your Own Forex Trading System

Hello and welcome to another episode of the bulls versus the bears. Today we are going to learn how to create our own forex trading system. No, we are not going to create a prototype space rocket. We are just going to create a set of rules  that will act as a guide for you as you trade.  In this vast space called life,you need a set of rules to guide you in everything that you do right? It’s no different with forex trading. You need a set of rules  for make trading decisions. This way when you trade, you are trading based on sound logic and not scattered emotions.

Your trading system is also designed to help you wait for solid confirmation of trade and exit signals. Thanks to your trading system, you can quickly locate good entry points, profit-maximizing points, and avoid fake entries and exits. Even more important, you must follow your trading system to the letter.Straying from this system could be very detrimental to your trading prospects.

So what are we are going to do? We are going to go through five steps for creating your prototype forex trading system. The first step is:

Decide Which Time Frame You Are Comfortable With

You need to decide which time frame you are comfortable trading with. The last thing you want to do is to pick a time frame which goes against your trading personality. If you are the type who like to trade quick and fast, then the M1, M15, M30 time frames are just what the doctor ordered. However,  you may be forced to stare at the screen like a security guard  all day looking fo those quick trades. Even worse, getting solid trade signals are very rare on these time frames. And it may cause you  too much stress.

However, if you don’t mind waiting a day or two or even longer, the H1 H4, daily , monthly, or   then longer time frames would fit you just fine. The H1 is more popular among most traders  for it flexibility. You can trade any type of trading system within this time block. What you need to understand is that there is no specific rule etched in stone as to the best time frame to trade in. It all boils down to  what your trading personality is,and how much time you can commit to trading. And please don’t follow the crowd when choosing a time frame to trade in. You will pay dearly for it. You choose a time frame that  suits your trading personality and aligns with your trading system.

If you ‘re trying to figure out which time frame to choose, look up Looking At The Big Picture Using Multiple Time Frame Analysis.

Even more important, you choose the currency pairs you are comfortable with and what hours they trade. If you are  the type who does not like staring at the screen all day you just set the trade, leave the house and let the market do its work.

Next up:

Decide Which Trading Tools To Trade With

You need to decide which tools you are going to trade with. These tools should be trader-friendly such that you should be able to identify trading opportunities at the speed of light. Not only should you choose trading tools that you are comfortable with, but you should be proficient using these tools.For our purposes, since we are using raw price data, the most obvious tools to use would be price action and candlestick patterns.  And as you well know,we just finished a series on interpreting candlestick patterns.If you missed those posts, I suggest you go back to them pronto: Just to remind you, we covered Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns, Dual Candlestick Patterns, and Triple Candlestick Patterns. So if you missed any or all of these posts ,acquaint yourself with these posts as soon as possible.

Another effective tool you could also use is Moving Averages. Just to remind you, moving averages help ascertain the potential  direction of trends. And  most of you are aware that we did a two part series on moving averages.So if you want to refresh yourselves on Moving Averages, check out Moving Averages parts I and II.  And for your information, you can use all of these tools if you so choose.You don’t need to get hung up on just one tool. Who does that anyways?

Anyways Next Up:

Decide How Much You Can Afford To Lose?

As some of you know by now .not all forex  trades end as profits. So you need to decide quickly how much money you can afford to lose on a given trade without shedding tears over it. In so doing it helps you stay within your risk limit. Even more important, it keeps your emotions in check,especially when you are tempted to jump back into the market after losing out on a trade. This is where risk management and position sizing comes in real handy.

Speaking of which? have you read my recent post on Risk Management? If you havent, do so as soon as possible if you do not want to risk your whole account go up in smoke.

Make Up Your Mind When To Enter And When To Exit

You have to make up your mind when to enter and when to exit. In other words, decide when to enter and when to exit each trade. The price action on the price chart usually does a good job of alerting you of a good entry point. The logical solution will be to wait until the candle signalling the trade has closed.

If   you want to adopt a cavalier approach, you can make your entry before the candle closes. However, you could  be committing suicide as the market could easily do a 360 on you and swallow your trading position like a whale swallows seaweed. And as  I’ve said before the forex market has a mind of it own. It’s very unforgiving towards adventurous traders who think they’re smart. So don’t make outsmarting the forex market part of your trading system. For more information about how to enter and exit trades, read up on Find, Enter, and Manage Forex Trades.

Last But Not Least:

Test Your Trading System

You’d be crazy  implementing your trading system without testing it first. It’s a no brainer. It’ll be like buying a shotgun without testing first. You have two options.  You can back test  your trading system through a strategy testy.Or you can use the manual route by recording possible trade entries and exits.Considering that we’re working with  raw price data, I suggest the latter. Why?You want to get a natural feel for how your trade entries are working. Not to mention the fact that you also want to get a close understanding of the workings of your trading system. Which is exactly what you are aiming for right?

If you are satisfied with the test results you then try your trading system on a demo account to  get a feel for the trading system.You also  want to get a virtual feel of how to  try out your trading system  as you are trading in a  live environment

By now you should be close to getting satisfied about the results from testing your forex trading system right? Well if you are satisfied, clap for yourself. Because  you are  nowready to graduate to trading  with a real account. But if you still have any lingering doubts, put your decision to trade on hold. Keep tweaking your trading system and retest it until you are satisfied with the results.

 

That’s  a wrap for ”How To Create Your Own Forex Trading System .”    Creating your own forex trading system is not rocket science. You are just creating a set rules out of the trading concepts that you’ve been studying. So long as you follow all the rules of your forex trading system, you will experience forex prosperity for the rest of your natural life. If you decide to ignore your trading system and trade on a crazy whim, you’re asking for trouble.

Til next time take care.

Do You Want To Join The Forex Trading Gravy Train?

If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First,  look up Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

Wanna Subscribe To My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

 

P.S. if you want to know everything there is to know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change . It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including setting your level and margin), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading e-book.

 

 

How To Get a Read on all Candlestick Patterns using Support and Resistance Levels

Hello and welcome to another episode of the bulls and  the bears. This week we’ll look at using all the candlestick patterns that we’ve studied this past few weeks to  interpret support and resistance levels.In plain English, we’ll find out how  a read on all the candlestick patterns  we’ve studied so far using support and resistance. Some of you may have some inkling about support and resistance  reading my post Identify Support and Resistance Levels with Price Action Analysis.  If you haven’t I suggest you do it real quick before reading this post. Or else you will be totally lost in the wilderness here.

But  before I go on, a little reminder. If you havent read my previous candlestick posts do so as soon as possible. Because if you try to make sense out of this post without reading the others, you may end up pulling your hair in utter frustration. Just so you know, we started by  learning Fundamentals of Learning Candlestick Patterns.  Then we touched Then we touched on How To Read Single Patterns To Identify Potential Market Moves . We then moved on to Dual Candlestick Patterns, and finally we ended on Triple Candlestick Patterns.  So there you have  it.

Now to today’s lesson

Applying Candlestick Patterns With Support and Resistance

Some say the  easiest way to interpret  candlestick patterns is by applying  them with support and resistance levels.  Some of you may be wondering”Now why is that the case?” because support and resistance levels reflects psychological areas where the bulls(sellers) and the bears(sellers) have set up their stalls.  Also, trading candlesticks in isolation can be detrimental to the health of your trading positions, not to mention your trading account. You need to know the market environment and what price is trying to get across to you.

Also , Getting to know  how   candlesticks react to these psychological areas will help you establish which direction the price will head to next. To help clear the confusion, let’s  look at a live price action situatio using the  three inside down pattern..

 

As you can see the  resistance  barrier has set up  stall at the 1.49 level. You’re probably like  like “Hmmm…. Looks like the breakout   is on here. I better jump in” Not so fast buddy! See the  bullish candle massaging the resistance barrier? You’d be better of waiting first for further confirmation. Jump in right  now,and you’ll suffer a massive  nuclear hit on your trading position and your trading account. Now let’s see how your patience is rewarded.

Three inside down formation forms. Time to sell!

It’s a good thing you waited,. Because two candlesticks later, here comes a nice Three Inside Down formation knocking on the door. Now  if you’ve been paying attention you’d know that a three inside out formation is a  bearish reversal. It suggests the bears are taken over because the bulls have run out of steam. Since you smell blood, you decide to go short on the currency pair. This means you want to enter a trade to sell the pair.  Now you know the    breakout  is really on here. And since you prefer to be safe than sorry you put a  nice stop loss above the resistance pair as indicated by the red line.

By  holding out for the Three Inside Down formation,you increased the odds of a making a nice profit. And your patience was also greatly helped by your knowledge  you acquired from studying candlestick formations. Let’s see how your decision to sell panned out.

Now you see why it pays to be patient? By holding out for the Three Inside Down Formation the pair has immediately netted you  a humongous profit. Time to buy that SUV you’ve been fantasizing about.. Even though you’ve made  a huge profit,you still have this lingering  question at the back of your head going like “Why do I have to trade candlestick patters with support and resistance levels when I could get more signals and make more money with candlesticks alone. Well another look at this chart using only chart formations might catch you to rethink that option

See all the various candlestick patterns shaded in pink and blue? If you had traded based solely on these formations, your trading positions and your trading account would have suffered a nuclear hit so massive that  it would have probably plunged you into a major depression  . So  now you know it pays to pair up candlestick formations with support and resistance? You will be doing your forex account a whole world of good if you don’t jump straight into the fray. Just wait for confirmation from the bears or bulls depending on the direction of the  trend.

Just so you know, this illustration does not apply  to the three inside down formation alone. You can apply this illustration using the various formations in all the candlestick patterns that we’ve studied so far-be it bullish or bearish reversals. All you have to do is to wait for confirmation signals that these patterns have broken through the resistance and support barriers, and then you make you make your move. Anything less will be a monumental disaster.

.

That’s  a wrap for ”How To Get A Read on All Candlestick Patterns Using Support and Resistance Levels  .”   It also  means we have come to the end of our candlestick pattern series. Hopefully you’ve gained a full understanding of how to read candlestick patterns on the price charts.

Til next time take care.

Do You Want To Join The Forex Trading Gravy Train?

If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First,  look up Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

Wanna Subscribe To My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

P.S. if you want to know everything there is to know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life as a trader. It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including How To Read Triple Candlestick Patterns), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading ebook.

How To Wrap Your Head Around Reading Triple Candlestick Patterns

Hello and welcome to another edition of the bulls versus the bears. Last week  we covered How To Get The Reading on Dual Candlestick Patterns.    This week we continue with our series on how to read candlestick patterns by tackling  how to wrap your head around reading triple candlestick patterns. Easy! Easy! I’m not saying wrap these patterns around your head like you’re wearing a bandanna. In plain English, I’m merely saying we’re going to learn how to read triple candlestick patterns on the price chart to identify potential market moves.

But before we move on to this week’s lesson, let me sound a little warning. If you have not  read the previous posts, you’d better read them quick before reading this post. Or else you’ll be pulling your hair out til there is none left. First learn the Fundamentals of Reading Candlestick Patterns. Next you need to know How To Read Single Candlestick Patterns To Identify Potential Market Moves. And, last but not least, get the handle on How To Get The Reading on Dual Candlestick Patterns. So there you have it. Now back  to the post at hand. First question we need to ask is:

What is a Triple Candlestick pattern?

Well a triple candlestick pattern  is  a specific candle formation  consisting of three candlesticks A three candlestick pattern helps you make sense of how a currency pair is likely to behave  within subsequent trading periods. Triple candlestick patterns could also signal  a continuation of bullish or bearish dominance on the market. At the same time, they could also signal reversal patterns. Meaning, that the end  of a bullish trend could usher the beginning of a bearish trend and vice-versa.

Regardless of the signal, triple candlestick  patterns produce, they have distinct features which should help you identify the appropriate pattern and interpret it accordingly. These formations should help you make  solid trading decisions based on what is generated on the chart.

With lout much ado,  let’s take a look at illustrations of some triple candlestick patterns. Starting with

Morning Star/Evening Star

Just so you know, the morning star and evening star are not just  celestial bodies of the universe.  As you can see they are they are also triple candlestick patterns who appear at the end of a trend. In the case of the morning star, it’s at the end of the downtrend. Whereas with the evening star it’s at the end of the uptrend. Let’s take a look at some of the physical attributes of both the morning star and the evening star, starting with the morning star

Candlestick Patterns: Morning and Evening Star

  • The first candlestick is a humongous bear, signalling the end of the previous bearish slalom.  ever, just like the evening star.
  • the second candlestick will also throw in a skinny body for equal measure.  This means the bulls and the bears are stuck in limbo as to what to do next. In others words, they’re stuck in indecision.
  •  The third and final candlestick is the ace in the whole. It confirms the inevitability of a bullish reversal as it closes in near or above the midpoint of the first bearish candle.

The evening star is the complete opposite.

  • With the evening star, the first candlestick is always a bull. And nine times out of 10, it’s usually part of a prevailing trend.
  • But then the second candle throws in a much smaller body. This means that both bears and bulls are  struggling to make up their minds on their next move. In other words they are in indecision mode.
  •  However the third candlestick is confirmation of an imminent reversal as it moves the midpoint of the first candle.

 

Next three candlestick pattern is:

Three White Soldiers and Three White Crows

Please the three white soldier and three white crows is not  the name of an acid rock band. The Three White Soldiers and Three White Crows is a   triple candlestick patternsformed  at the tail end of bullish and bearish trends. Let’s see this  patterns on price action duty, starting with the Three White Soldiers.

Candlestick Patterns: Three White Soldiers and Three Black Crows

The Three White Soldiers  pattern is very powerful, and screams right in  your face.  Why? because it unfolds after a long downtrend and a short period of consolidation. In case you’ve forgotten consolidation is when both bulls and bears are take a slight pause to decide their next move. Consolidation could also be interpreted as a time of indecision as both buyers and sellers struggle to make up their minds as what to do next. For more information on on consolidation, read up on Forex Market Goes Sideways.

Now you need to take note of the following characteristics of the Three  White Soldiers as indicated in the diagram above..

  • The first bull is known as the reversal candle. It lets everybody know that the bearish run is over or the period of consolidation following  bearish run is at an end.
  • To validate the bullish pattern, the second bull should be bigger than the first bull(or reversal candle). Also the second candlestick should be closing in on the high  of the first candle, thus creating a tiny,almost invisible wick.(That little rod jutting at the top).
  • The last bull should be a full harami. There should be not even a whiff of a shadow and must be roughly the same size of the first candle(reversal candle).

As to be expected, the three black crows are completely opposite. They show up  after a  strong uptrend has come to an end. That tells everybody that a bearish reversal is about to kick in.   Here are a few characteristics about this pattern that you should pick up when interpreting it.

  • The second bearish candle is bigger than  the first bearish candle. And it closes at or near the first low of the first candle. The third and final bear is what I’d call the confirmation bear. Not only does it formally announce the formation of the black crows, but it’s also the biggest bear of the lot.  Also it has a n almost non-existent shadow, So anytime you’re looking for a black crow formation, get confirmation from this humongous bear first.

Last but not least is

Three Inside Up and Three Inside  Down

The Three Inside Up and Three Inside  Down Pattern is another trend reversal pattern which can be spotted just when the downtrend is ending its cycle. This tells everybody who cares to know  that the bulls  are about to start their climb up the hill.  Let’s look at The Three Inside Up and Three Inside Down Patterns  in action on the charts.

Candlestick Patterns: Three Inside Up and Three Inside Down

  • As you can see, the first candle of any  Three Inside Up  pattern is a humongous bear found at the end of the bearish downtrend.
  • The second candle is a bullish candle and usually measures up to the midpoint of the bearish candle
  • The third candle  is confirmation that the bulls have gained the upper hand. And for the confirmation to take place, it has to close above the high of the first candle.

The Three Inside Down is the complete opposite of the Three Inside Up. The Three Inside Up  pattern kicks off at the end of the uptrend. And as usual it means the bulls have run out of steam and that the bears are about to start their downtrend. This usually means the price starts tumbling down. Watch out for the following pointers when interpreting the Three Inside Down Pattern

  • The first candle should be up top on the uptrend and should be a bull. /that signals the end of the bullish run. Anything else is a distraction.
  • The second candle should reach the midpoint of the first candle. This usually suggests  indecision on the part of both bears and bulls.
  • However the third candle is the  confirmation candle. It signals the formation of the Three Inside Down pattern. It also tells everybody that the bears have overpowered the bulls. But for that to happen, the third candlestick needs to close the first candle’s low.

If you want to up your game on how to recognize price  confirmation signals on trades and how to identify trends, read up on Price Confirmation Signals: How To Weed The Chaff From The Good and Trade Trends With Price Action Analysis respectively.

 

That’s  a wrap for ”How To Wrap Your Head Around Reading Triple Candlestick Paterns   .”   So if you  spot or even a get a whiff of any of the patterns forming, get your bullets ready.

Til next time take care.

Do You Want To Join The Forex Trading Gravy Train?

If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First,  look up Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

Wanna Subscribe To My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

P.S. if you want to know everything there is to know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life as a trader. It sure did mine.

And if you are looking for   a place  to put your price action trading strategies into practice(Including How To Read Triple Candlestick Patterns), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets.  But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading ebook

 

 

 

 

 

 

 

 

 

 

 

Fundamentals of Reading Candlestick Patterns

Hello People

Remember earlier in our price  action charting when I did  a post on Ten Candlestick Patterns You Need To Know? Well I  have been having thinking deeply lately. How about we do a whole series on candlestick charting? I say this because I have this sick feeling of some readers saying ” Well it’s all well and good that you are giving us all these candlestick fancy candlestick patterns. But what the heck is a candlestick?”  I know it may be a bit late in the day.But it makes sense to get into the fundamentals of  reading  candlestick patterns. Because  the last thing  we want is readers pulling their hair out blowing steam out of their nostrils saying” I’ve no idea what you’re talking about.”

So here is what we’re going to do. We’ll get started with a definition of a candlestick and then we’ll delve in fun stuff such as the anatomy of a candlestick, and  basic candlestick patterns.

But first things first.

What exactly is a Candlestick Chart?

Well, a candlestick chart is a graphical representation of traders and financial institutions that track the price range of currency pairs using a combination of a line and bar chart.  The candlestick chart records the open high, low, and close of every trade for each specific time period. The figures making up the lin chart are known as the candlesticks.

The candlesticks  are very useful for visualizing price action patterns, from the 5 minute time frame all the way up to the 1 month time frame. Candlestick charts are also used by traders to identify simple trends as well as complex price patterns.

Which brings us to the next question:

 

How Did Candlestick Charts Originate?

Well candlesticks came about way backin the 18th century through a Japanese rice trader by the name of  Munehisa Homma.  Now at that rice had just been adopted as a standard currency of exchange. Some of you are probably  wondering “Well, Why rice? Didnt they believe in paper?” Because no standard currency existed at that time. And so they agreed to adopt rice as the currency of exchange.  Subsequently all the  rice barons stored their rice in huge warehouses in Osaka, one of the premiere cities of Japan at that time. The rice barons would then sell or trade  their rice coupon receipts among themselves. Automatically this feverish trading made rice the first futures market.

Now Homma was a pretty smart guy. Not only did he make a huge fortune out of rice and dominate the rice market, but he also studied the entire spectrum of rice trading from the fundamentals to the psychology of trading.  Homma’s trading techniques eventually morphed into the candlestick methodology, which was then adopted by Japanese market analysts round the same time that the Japanese stock exchange came into being in the 1870’s. It so happened that Charles Dow, inventor of  the Dow Jones Average,  himself  stumbled  on the candlestick methodology in 1900. He probably said to himself” hmmmm..   I think these candlesticks could be very useful for my business.”

However, the individual who really introduced Japanese candlesticks to the forex world was a gentleman by the name of  Steve Nison in his book “Japanese Candlestick Technique s.”  He learnt the candlestick methodology under the able tutelage of Homma Nihesa. The rest as they say is   candlestick history. And as most of you know by now, candlestick charts remains the most popular technical analysis charts  as far as financial instruments goes.

I guess the next question some of you want to ask is

Why Candlestick Charts?

Well unlike bar and line charts(Watching a line chart is like looking at a heart monitor) ,candlestick charts  represent a more accurate thorough, and graphical  description of the price action on the price charts. Candlestick Charts do a better  graphical job visually, as far as letting the traders know who has the upper hand between the bulls and the bears. Candlesticks also show us another dimension of the a specific time frame’s price action through pictorial revelations of the strength(or lack thereof) behind each price movement.

Now these beautiful graphical representations makes it easier all those single bar and multiple bar representations. This improves your chances of catching high probability trade setups. Also because candle stick setups use the same data as bar charts(open high,low,close),  you can also apply the same bar chart signals on a candlestick chart as well. You know the saying, anything a man can do,a woman can do better? The same dynamic applies to the relationship between  candlestick charts. Anrt can do, acaything a bar chart can do, a candlestickchart can magnify it a thousand times better. You getter better clarity, not to mention additional  trading signals.Candlestick charts are more exciting to look at.

Now that we’re done with the history lesson, let’s take a look at a few pictorial examples:

 

 

Japanese Candlestick Anatomy

As you can see, we have two candlesticks – White one to the left, the  dark one to the right. The white candlestick is bullish and is found on the uptrend. The white candlestick usually opens low and  closes on a high. The black candlestick on the other hand is bearish and   can be found on the  downtrend. It starts on a high price and closes on the low. Here are a few things to take note off:

  • The white hollow candlestick comes about when the close is above the open. In other words the currency pair starts on a low and finish strong on a high. This explains the huge bullish surge up the hill by the bulls.
  • The full black candlestick on the right comes about when the bears start on a high and then dissipate on a low. This comes about around the same time the bulls run out or steam and the bears take over the show. This triggers the bears downward slalom down the slopes Consequently the bears  depress the price to the consequent low.
  • The “body” refers to the hollow section of the white candlestick and the filled section of  the black candlestick.
  • The skinny lines poking above and below the body are popularly known as shadows, or wicks. And they record the high and low prices of the currency pairs.

 

A Further Breakdown of The Candlestick’s Body Parts

Candlesticks are very similar to us humans. They have various body sizes,slim,fat,medium-sized, tall, short e.t.c. Let’s take a look at the various body types – starting with:

 

Long vs. Short Japanese Candlesticks

Anytime you see a long white candlestick, think bullish buying pressure. This tells you the bulls are in town and running amok. A long candlestick translates into a higher close above the open. This suggests an aggressive stance by the bulls, causing a strong price increase.In plain English, the bulls are all over the bears.

However, long black candlesticks suggests the bears are getting back at the white bulls. And it also suggests strong selling pressure  on the part of the bulls. The longer the black stick, the further the closing price is below the open price. This causes price to plummet as a result of the bears open hostility. In plain English, the bull are galling the bears with their sharp horns.

Next Is:

Those Creepy Shadows

If you think I’m talking Halloween, get your mind out of the gutter.  I’m talking about the upper and lower shadows  you find in the anatomy of candlesticks.  They drop important clues about the happenings  during the trading sessions. Upper shadows suggest a stronger trading session while lower shadows reveal a weak trading shadow.  Long shadowed candlesticks tell the story of trading action occurring completely outside the open and close areas. While short-shadowed candlesticks tell us that the trading action was centered close to the open and close arena. Let’s take a look at an illustration of the long shadows

Japanese candlesticks with long shadows

If you see a candlestick with a long upper shadow and  long lower shadow it can only mean one thing. That the bulls(buyers) are turning the screws on the bears(sellers), causing prices to jump sky high. But all of a sudden the bears(sellers) came out of nowhere and drove the price down, and ended  the session  back at open price.

On the flip side, a candlestick with a long lower shadow and short upper shadow spells doom for the bulls. That the bears have sharpened their horns and knocked the bulls off their perch and further depressed the price. But then the bulls mount a comeback,drive price sky high to end the session near the open price.

Next up is:

Basic Candlestick Chart Patterns

The first candlestick pattern we’re going to look at is:

Spinning Tops

The makeup of spinning tops are a long upper shadow, long lower shadow,and small upper bodies. Dont worry too much about the character. Just remember the shadow and body types. By the, way The makeup of spinning tops are a long upper shadow, long lower shadow,and small upper bodies. Dont worry too much about the character. Just remember the shadow and body types. By the, way when you see a spinning top, just remember that the buyers and sellers are in a war of attrition. In other words they are in a state of indecision. They’re not sure whether to bu or sell. Let’s take a look at an illustration below:

Forex Candlestick Pattern: Spinning Tops

As you can see there is little movement   between the white hollow body on the left and the black filled body on the right. Even though the trading session opens and closes with barely a whimper, there is significant movement of price on both sides. Since both buyers and sellers are unwilling to budge, we end up with an eventual standoff.

There are a few things you need to take note off:

  • If you see a spinning top in the uptrend, it means  the buyers are losing steam  and that the sellers are about to take over the show. In Forex trade speak, a reversal is about to start cooking.
  • If you see a reversal in the downtrend, it’ the complete opposite. The sellers are also running out of breath and that the buyers are about to take them out for the count. In forex speak, it can only mean a bullish reversal is on the cards.

I

Next Up is:

Marubozu

If you’re thinking Marubozu is a Halloween chant, please get your mind out of the gutter. The Marubozu pattern has no creepy shadows sticking out of its body. Regardless of whether the candlestick is hollow or filled, the price’sopen and close is pretty much the same. It’s always consistent. Let’s look at two types of Marabozus.

Forex Candlestick Pattern: Marubozu

As you’d have noticed,the white Marubozu  and long with no shadows sticking out of its butt(or body) The formula is simple as ABC:Open Price = Low Price. While Close Price =  High Price. The fact that the White Marubozu is a bullish candle suggests that the buyers  are pretty much running the show. And when that scenario is playing out, it can mean one or two things: Either a bullish continuation or a bullish reversal.

And just like the White Marubozu, the Black Marubozu has no shadows sticking out of its butt either. But since the Black Marubozu is bearish looking, it connotes the impression of bearish dominance of the price action by the sellers. You don’t need anybody to tell you that this scenario suggests one of two possibilities: Either a bearish continuation or  a bearish reversal.

Next up is:

Doji

Now when you hear the name Doji you’d probably be thinking “Hmmm…Sounds like some exotic name in the South.” Nah,  Doji is all Japanese.In fact there is nothing exotic about it when you see it for the first time on the charts. The Doji is so small and  skinny it could be easily be mistaken for a scare crow. And just like the spinning top,  The sight of a doji on the price chart spells war of attrition between  the buyers and the sellers. In other words they are undecided whether to buy or sell.

Yes, prices do move above and below the open price. But it only happens at or close to the open price. And since neither side is unable to deliver the knockout punch we call it a draw. Now there are four types of Doji candlesticks that can be spotted on the price charts. Let’s see what they look like:

Forex Candlestick Pattern: Doji

As can see there are four variants of  the skinny Doji, depending on the length of the upper and lower shadows. On the far left is the long legged doji, shaped like a crucifix. Next is the dragonfly doji(No relation to the dragon fly) shaped like a T. Next is the gravestone doji shaped like an inverted T  Last but not least is the four price doji. This only happens where all four prices(open close high,low are all the same). Usually the transactions in this scenario are ver little.So you need to break a sweat atall over this set up.

Now if you see a doji on your chart ,keep a close eye on the preceding candlesticks. If a doji appears after candlesticks with long hollow bodies(such as the White Marubozu), it tells us the buyers are losing stamina. Since there are no buyers around to shore up their offense, the sellers start sharpening their knives and look to depress the price further downwards. Now let’s look at a few scenarios.

Forex Candlestick Pattern: Long White Candle and Doji

As you can see, a Doji forms after a White Marubozu. And when that happens The Doji’s  presence spells doom for the sellers as their resolve will start weakening. For price to continue dip, the sellers need reinforcements, but the these reinforcements are nowhere to be found.This will definitely be music to the ears  of the buyers as they look to cash in on their breakthrough.

Forex Candlestick Pattern: Long Black Candle and Doji

When you see a dark knight(or long black Marabuzu) being led by a doji, it can only mean one thing – trouble for the buyers. The buyers are  losing momentum, and the sellers are just looking to swoop in like hawks  catching their helpless prey. In plain English, expect a bearish reversal.

If you are a bit rusty about trading trends, just revist Trade Trends With Price Action Analysis

 

That’s  a wrap for ”Fundamentals of Reading Candlestick Patterns.”  Hopefully  this post has helped demystify the mystery behind these candlestick patterns. And that you can recognize like the back of your hand the moment they show up on your  chart.

Til next time take care.

Do You Want To Join The Forex Trading Gravy Train?

If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First,  look up Why Forex Trade Is So Popular.  Next, you learn  the fundamentals of forex trading by reading  Forex Trading Basics – Top To Bottom Part I  and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns,  Dual Candlestick Patterns, and Triple Candlestick Patterns .    Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading? 

Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels.  And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know  How To Read Candlestick Patterns using Support and Resistance Levels.

However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch  of several weeks, consult  How to Spot High Probability Trades.  And if you  are  still not sure about  price action trading, find out   Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the  suggested posts above are the most important posts to get  you started.

Wanna Subscribe To My Mailing List?

Do you want me to send you the latest posts to your email address inbox?Then  subscribe to my mailing list and I’ll send my blog posts direct to your inbox. It wont cost you a penny.

P.S.

If you want to know everything there is to know about price action trading   Download for free The Ultimate Guide To Price Action Trading by Rayner Teo. This brilliant ebook will change your life as a trader. It sure did mine.

And if you are looking  a place  to put your price action trading strategies into practice(Including learning the basic fundamentals of  reading candlestick patterns), and get a simulated feel of  live forex trading conditions   before  trading live, open a free demo trading account with Easymarkets. But  if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading ebook

 

 

MetaTrader 4 Part II – How To Place Trades in Price Action Trading

Hello people

Last time we learnt how to download and set up the Metatrader 4 platform for price action trading. Today we are going to do  Part II, by far the most exciting part. We are finally going to learn how to place trades on the Metatrader 4 platform for price action trading. I’m sure most of you have been fantasizing about this part all week long. No need to wait any longer the moment has finally arrived.

I know  I said the last time that the Metatrading platform 4 platform is so user-friendly that anybody can use it.But at the same some people may be so intimidated by the numerous tabs and buttons splashed across the screen on the platform. But not to worry! If you are in that category of people, I will hold your hand right through this  post so you don’t fall. So onward:

How to Enter A Trade Via Market Execution

 

Image result for MT4 How To Enter A Trade Via Market Execution

  • First click on “New Order” .It’s right underneath the window label.

Image result for MT4 - select currency pair

  • Upon selecting your order, you select  the currency pair you want to trade from the menu at the top. Just click the arrow and make your selection.
  • Upon making your selection, you click on the menu label “Type” and select “Market Execution”
  • Next you indicate the size of the position you want to buy  by clicking on the menu labelled “Volume”. Keep in mind that one standard lot(1.0) is worth 100,000 units. So if you intend on buying 5,000 units select 0.5
  • If you have anything to say about your trade  just fill the ‘Comment’ column. But that’s optional.
  • Finally decide whether you want to buy or sell the currency pair.A dialogue box will then show up to inform you that your trade has been executed.

 

Next Up is:

Entering  A  Trade By Way of Pending Order

Image result for MT4 How To Enter A Trade Via Market Execution

Click on “New Order”Image result for MT4 - Entering Trade Through Pending Order

 

  • Next you choose your currency pair of choice from the topmost menu.
  • Your next task is ti select “Pending Order” from the menu labelled “Type”
  •  you  will want decide whether to buy or sel the currency pair in the order type drop down list.

 

Once you’ve made that decision, you will then be presented with 4 options:

And they are as follows:

Buy Limit – if you plan on going long at a level lower than market price

Sell Limit – if you plan on going short at a level higher than market price

Buy Stop – if you plan on going long at a level higher than market price

Sell Stop – if you plan on going short at a level lower than market price

  • Once you make your selection, fill in the price at which you want to make your appearance in the market.
  • After filling in the price, enter the size of your trading position in the volume field.
  • Next fill in your stop loss and take profit fields.
  • Keep in mind that you also have the option of setting an expiration date on your order. Better safe than sorry.
  • Once you have checked all the boxes,click the “Place”button to enter your trade
  • A dialogue box will then pop up to say “Voila! Your trade has been entered.”

If you’re not sure of your pending orders I suggest you read up on You Need To Protect Your Trading Position and Profits with Pending Orders

 

How To Modify Trades

CaptureSelect “Trade” tab at the bottom of the metatrader platform.  This contains all your trades including your entry prices, position sizes, stop losses,and profit targets.

However,if you want to add/modify your trades,here is what you do:

Image result for MT4 - Modifying Trades

  • Right click on the trade you want to modify and then select “Modify’ or “Delete.”
  • Next you fill the stop loss and take profit fields with your desired levels. And when you’re done, hit the “Modify” button.
  • A dialogue box then pops up to tell you that”Guess what,your adjustments have been Executed.”

 

And Finally:

How to Close Open Trades

Image result for MT4 - How to close open trade

 

  • Right click the  trade that you want close
  • If you want to close the entire position, select the yellow button below the “Buy” and “Sell” options.
  • After hitting the close button, you should see a change in your profit balance, reflecting  your profit or loss you made on your closed trade.
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