• Bar Formations
  • Candlestick Formations
  • Reversal Candles

Bar Chart

  • Bar charts are often referred to as OHLC charts
  • Distance from high to low represents the range
  • Allows traders to identify patterns easily

Reversal Bars – Key Reversal Days

  • Bearish Key Reversal – surge to a new high then reverse and close below the previous bar close
  • Bullish Key Reversal – drop to a new low then recover and close above the previous bar close

Reversal Bars – 2 Bar Key Reversals

  • Bearish 2 Bar Reversal – opens at the same level but closes lower with the same low as previous
  • Bullish 2 Bar Reversal – opens at the same level but closes higher with the same high as previous

Reversal Bars – Inside Days

  • Bearish inside day – prices stay within the range of the previous bar
  • Bullish inside day – prices stay within the range of the previous bar

Reversal Bars – Outside Days

  • Bearish Outside Day – surge to a new high then reverse and close below the previous bar’s low
  • Bullish Outside Day – drop to a new low then reverse and close above the previous bar’s high

Reversal Bars – Spike

  • Bearish Spike – surge to new highs then reverse and close near open but above the previous close
  • Bullish spike – drop to new lows then recover and close near open but below the previous close

Japanese Candlesticks

  • First used in Japan during the 16th century
  • Used by rice traders to forecast future prices
  • Japanese candlesticks provide early warning signals to possible price changes
  • Can help traders identify trend continuations and reversals

Anatomy of a Candlestick

  • Colour of the body
  • Size of the body
  • Length of shadows

Doji Patterns

  • Doji candlesticks have no body
  • Suggest indecision and are considered neutral
  • Any bias depends on the prior trend
  • The length of the shadow may vary

Bullish and Bearish Engulfing Patterns

  • The Bearish Engulfing is formed at the end of an uptrend and is considered a bearish signal
  • A red body is formed that opens higher, and closes lower than the previous green candle
  • The Bullish Engulfing is formed at the end of a downtrend and is a bullish signal
  • A green body is formed that opens lower, and closes higher than the previous red candle

Piercing and Dark Cloud Patterns

  • The dark cloud is formed at the end of an uptrend and is considered a bearish signal
  • The last candle opens above the previous high closing lower than 50% of the green candles body
  • The piercing pattern is formed at the end of a downtrend and is a bullish signal
  • The last candle opens under the previous low but closes above 50% of the red candle’s body

Morning and Evening Star Patterns

  • The Evening Star is formed at the end of an uptrend and is considered a bearish signal
  • The evening star, the planet Venus, occurs just before the darkness sets in
  • The Morning Star is formed at the end of a downtrend and is a bullish signal
  • The morning star, the planet Mercury, foretells the sunrise, or the rising of prices

Shooting Star and Hammer Patterns

  • The “Shooting Star” is formed at the end of an uptrend and is considered bearish
  • A small red body with a long upper shadow with  a very small or no lower shadow
  • The “Hammer” is formed at the end of a down trend, and is considered bullish
  • A small green body with a long lower shadow with a very small or no upper shadow
  • Candlestick Anatomy
  • Filtering Entry Signals
  • Reversal Candles

 

Anatomy of a Candlestick

  • Colour of the body
  • Size of the body
  • Length of the shadows

Entry and Exit Filter

  • When we want to enter a long position we buy above the high of the candle (upper shadow)
  • When we want to enter a short position we sell below the low of the candle (lower shadow)
  • The same filtering technique applies for stop losses

Reversal Candles

  1. Bearish reversal candle
  2. Bearish reversal candle
  3. Not a reversal candle
  4. Bearish reversal candle

Add Your Heading Text Here

  1. Bullish reversal candle
  2. Bullish reversal candle
  3. Not a reversal candle
  4. Bullish reversal candle