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The Ultimate Candlestick Patterns Trading Course 

Last Updated: January 25, 2024

By TradingwithRayner Editorial

In this video, you will discover how candlestick patterns can help you identify high-probability trading setups – So you can profit in bull and bear markets.

Video Transcription

Hey Hey, What’s up, my friend?

Welcome to The Ultimate Candlestick Pattern Trading Course.

In this course, you’ll learn how to identify high-probability trading setups.

Some of you might be thinking…

“I’m new to trading would this help me, I have no idea about candlestick patterns, and I don’t know technical analysis”

Don’t worry, because in this course I’ll walk you through step by step from A to Z on how to trade candlestick patterns.

Even if you have no trading experience, by the end of this session, I can assure you that you will be able to trade candlestick patterns like a pro.

Sounds good?

Let’s begin…

What is a Candlestick Pattern?

A candlestick pattern is essentially a method of reading a price chart.

It originated back in Japan that’s the history, and the key component of a candlestick chart is that it shows you four things.

  • The opening price.
  • The high of the session.
  • The low of the session.
  • The closing price.

When I use the term session, it can mean different things…

If you’re looking at Candlestick charts on a daily timeframe, it means the high of the day.

Looking at Candlestick charts on the one-hour time frame it means the high of the one-hour session.

It can mean different things…

Depending on the timeframe you’re looking at, we will cover that in more detail later.

How to Read Candlestick Pattern?

Remember there are only four things;

  • The open
  • The high
  • The low
  • The close

Looking at this:

candlestick patterns

You can see that the candles are typically two colors either green or red or perhaps can be black or white.

Sometimes you can even change the color if you want, but generally, the most common color is green and red.

When you see a green candlestick pattern it means that the price has closed higher for the session.

Bullish Candle

You can see that this is the opening and closing price are these lines over here:

candlestick patterns

When you see the black shadow, we call it the wick.

The upper wick is the highest of the session, and the lower wick is the lowest of the session.

Bearish Candle

The red color bar is known as the bearish bar.

The open is at the opposite side, it’s now at the top of the candle.

candlestick patterns

The close is at the bottom.

You can see the low of the session

The lowest and the highs of the session is here over here:

Difference Between a Bearish Bar and a Bullish Bar

The main difference between a bearish bar and a bullish bar is that the open and close are already opposite sides.

The price has closed lower for the session and the open has to be above the close.

Depth Knowledge of Candlestick Patterns

The first thing you’ll notice in a candlestick, there are two main components namely:

  • Body
  • Wick

candlestick patterns

The body is the green portion and the black shadow is called the wick.

The body tells you who’s in control, in this case, you can see that the buyer is in control.

The buyers push the price up and close at the high of the session.

However, you can neglect the shadow, because what’s telling you is that there’s a price rejection of higher prices.

Because if you think about it, this was once the highest of the session.

This simply means that at one point the sellers pushed the price from these highs down lower until its price closed over here:

candlestick patterns

The third thing that I want you to know is that, look at this candlestick.

candlestick patterns

What is the size of the body relative to the wick?

As you can see, you have a wick and body, but this time the message is completely different. If you look at this candlestick pattern,

It shows that yes, the price did close higher. But if you look at the wick, you will notice that the price rejection at one point is the highest of the session.

The price came all the way down from the high of the session and closed at that level.

What does this tell you?

It tells you that the buyers did push the price up slightly higher for the session. However, there was an immense amount of selling pressure and a strong price rejection that pushed the price lower during the session.

This isn’t a very bullish pattern.

It’s quite bearish. As it shows immense selling pressure by the sellers. You also want to pay attention to these three things.

  • The body
  • The wick
  • The body relative to the wick.

Usually, if the wick is much longer than the body, it’s a sign of price rejection.

This is how you read candlestick patterns.

Variations To Candlestick Patterns

The first one I think is something that you are probably familiar with.

candlestick patterns

The price opened, and then it closed. This is the highs and the lows of the session.

In terms of the meaning…

You can see it’s quite straightforward the price opened near the lows it tried to come down lower but was rejected then finally closed near the highs.

It’s a sign of bullish strength.

Next…

candlestick patterns

The price opened and closed.

When the market just opened possibly what happened is that the price came down lower.

The sellers were in control then the buyers took charge and pushed the price all the way higher back towards the highs.

Then finally the sellers came back in and the market closed at this price level.

The meaning behind this is that there is indecision in the markets where both buyers and sellers are present.

If you ask me generally, this is what we call an indecision pattern.

Next…

If you look at this last candlestick pattern, the price opened here:

candlestick patterns

The market came down lower, sellers were in control then the buyers took charge and reversed back finally closing near the highs.

The meaning of this pattern is rejection of lower prices, the buyers are clearly in control.

Moving on…

candlestick patterns

This is the opposite of what we have just shared earlier. This is the selling version of it.

Candlestick on Different Timeframes

 If you recall, I said that candlestick charts can appear in different time frames.

On a 60-minute timeframe, a candlestick is one hour. For every hour a bar would be painted.

The same applies to the daily timeframe. For every 24 hours, a bar would be painted.

This is how candlestick patterns can form on the different timeframes.

Combining Candlestick Patterns

Candlestick patterns just show you the price of the different sessions.

Look at this…

candlestick patterns

Let’s say this is a one-hour candle for the green and the red candlestick respectively.

When you combine these two candlestick patterns, what timeframe is this going to be?

candlestick patterns

It would be the H2 timeframe.

How did this candle come about?

A H2 candlestick simply means, identifying the high and the low over the last two hours, the opening price of the first and second candles.

Does it make sense?

I hope you can understand how candlestick patterns can be combined.

This is very useful when you’re looking at a price chart.

How NOT to Trade Candlestick Patterns

You know how to read and combine the candlestick patterns.

How do you not trade candlestick patterns?

This is a mistake many new traders make because as I have said earlier, if you recall, if you see a green candle, it means bullish, If the candle is red, it means bearish.

What traders would do is that they look at a chart and they find a series of green candles and they go long.

candlestick patterns

They say…

“The candle is bullish let me buy it”

Bam!!!

The market reverses.

candlestick patterns

Similarly…They see red candles…

“It’s so bearish!!!”

 Rayner’s said…

“Seller is in control I should go short”

 Bam!!!

The market reverses.

What’s going on? Why is that?

I’ll explain…

“You don’t want to trade candlestick patterns in isolation”

What is isolation?

It means you don’t want to trade candlestick patterns by itself. Just because that candlestick is green or red doesn’t mean you go long or short respectively.

Don’t trade candlestick patterns in this manner.

How To Trade Candlestick Pattern

I would like to introduce to you something that I call the “TAE Framework”

T – Trend

A – Area of Value

E – Entry Trigger

When you want to trade candlestick patterns, remember these three things.

Before I can dive into this methodology, I need to explain to you what an entry trigger is.

Entry Trigger

I would say candlestick patterns are very useful and powerful entry triggers into a trade.

Before we can go into this framework, let me share with you five powerful candlestick patterns that can serve as an entry trigger.

Engulfing Pattern:

candlestick patterns

The green candle is what we call the bullish engulfing pattern. Why is that?

If you look at the body of the green candle, it has engulfed the body of the previous candle.

The previous candle is the red candle.

The sellers were in control and on the second candle the buyers were somehow on steroids. It opened near the lows and finally pushed the price up.

This is a sign of strength.

It shows that the buyers have reversed all the selling pressure and more.

This is why it’s called a Bullish Engulfing Pattern.

Bearish Engulfing Pattern

candlestick patterns

This is just the opposite.

Buyers were in control, but the sellers took charge and pushed the price lower.

This is a bearish engulfing pattern telling you what sellers are in control.

Hammer and Shooting Star

candlestick patterns

This is something that you might be familiar with.

This is showing you price rejection in the market. Rejection of lower prices.

At one point, the sellers were in control to push the price lower near the lows of this session and then the buyers came in and pushed the price higher.

This is a sign of strength.

Rejection of lower prices.

Shooting Stars

candlestick patterns

This is showing you rejection of higher prices.

The buyers took charge, took the price higher, and then the sellers suddenly came in and pushed the price down.

This is a rejection of higher prices

This pattern would help you identify market reversals.

Dragonfly and Gravestone Doji

candlestick patterns

This sounds handful.

But dependent.

This is very similar to the hammer and shooting star.

This is a sign of price rejection

Morning and Evening Star

candlestick patterns

This is a morning star:

This is somewhat similar to the Engulfing pattern but with a slight variation to it.

In the first candle, the sellers were in control, and in the second candle, there was indecision in the market.

Then finally, the third candle opened and pushed the price up and closing near the highs.

It’s a bullish reversal pattern.

The evening start is just the opposite of the first candle.

candlestick patterns

Buyers are in control and the second candle is an indecision candle. Then the third candle the bears came in and pushed the price lower closing near the lows.

Tweezer Bottom

candlestick patterns

This is a powerful pattern.

It shows you rejections of lower prices two times.

First and second rejection.

This is a sign of strong rejection of lower prices.

Tweezer Top

candlestick patterns

At one point, it was at the high of this session before the sellers pushed the price quite a bit and finally closed near the middle of the range of the candle.

Then the next candle, the price opens and the buyers took charge and got rejected at the same level before the sellers pushed the price lower closing near the low.

Two times the price rejection of higher prices, this is a bearish reversal pattern.

The TAE Framework

Now that you understand the five powerful candlestick patterns, how does this fit into the TAE framework?

We have settled the entry triggers portion because of the reversal patterns that you saw earlier, those are the entry triggers that you can use to enter the trade.

But before you trade it, remember we said don’t trade it in isolation, this means that we have to use other factors or other market conditions to look for.

Before we wait for our entry trigger, the conditions that we look for are the TAE framework.

What we are looking for is that if the price is above the 200MA, we will have a long bias.

This means that we want to be a buyer in this market condition.

If the price is below the 200 MA, we’ll have a short bias. this means that we will only be looking to short.

Trend

  • If the price is above the 200MA, have a long bias
  • If the price is below the 200MA, have a short bias

Understand that when I define the trend, it doesn’t mean that just because the price is above the 200-period moving average you go long immediately…

This is just to give you a bias that now it’s time to be buying. It’s time to be looking for buying opportunities.

Area of Value

  • Support and Resistance
  • Moving Average
  • Trendline
  • Channel

Entry Trigger

  • Engulfing pattern
  • Tweezer Tops and Bottom etc.

Using this framework, we can then formulate trading strategies to profit in bull and bear markets.

Remember the first thing we are looking for is the trend

If it’s an uptrend, we look to buy and we will buy it at an area of support, moving average, and then we look for an entry trigger.

The entry trigger would be a bullish reversal pattern like a hammer, a bullish engulfing pattern, dragonfly doji, etc.

Does it make sense?

Example:

Let’s bring all the concepts together

candlestick patterns

I don’t have the 200MA on the chart but needless to say, the trend is down because you can see that the market is moving from up to down.

The price came into this area of resistance. The price was rejected thrice.

You’ve got this entry trigger (Shooting Star)

Now you’re trading candlestick patterns in the context of the market meaning you’re trading candlestick patterns based on market structure.

Based on the trend this increased the probability of your trade working out.

The shooting star occurred at the resistance in a downtrend and the market did continue slightly lower.

One thing to point out is that the examples I showed you are all winning trades but in reality, you won’t get all winning trades.

You will probably meet losers.

The reason why I share winning trades is that it’s easier to illustrate the concept but again those charts or rather the chance you are seeing now are cherry-picked.

Example:

candlestick patterns

What is the trend?

Downtrend.

Where is the area of value?

This time around the area of value is a moving average and it acts as a dynamic resistance.

What is your entry trigger?

We have a bearish engulfing pattern.

We have three things

The trend, area of value, and entry trigger.

We can go short and have our stops somewhere about the highs.

Conclusion

Candlestick patterns are definitely one of the most popular subjects when it comes to technical analysis.

However, it’s always used the wrong way.

This is why in today’s guide I’ve shared with you that:

  • A candlestick consists of an open, high, low, and close
  • The difference between a bearish and bullish candlestick pattern is the color of the body, and the length of its wick
  • Candlestick patterns has a lot of variations from large body and small body, to long wicks and short wicks
  • Different candlestick patterns can equate to different patterns on the higher timeframe
  • The wrong way to trade candlestick patterns is to enter the trade without looking at the market structure
  • The best way to use candlestick patterns is to use it as an entry trigger
  • You can use the T.A.E. framework to trade candlestick patterns

How about you…

Do you agree with the concepts I’ve shared with you today?

If so, which one stands out the most to you?

Let me know in the comments below!

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