Candlesticks A Review · Introduced to Western Traders by Steve Nison in the 1990’s Knowledge...

The Art & Science of Active Trend Trading

Candlesticks—A Review

Copywrite ATTS 2007-2015 1

U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures

and Options trading has large potential rewards, but also large potential risk. You must be aware

of the risks and be willing to accept them in order to invest in the futures and options markets.

Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to

Buy/Sell futures or options. No representation is being made that any account will or is likely to

achieve profits or losses similar to those discussed in this training. The past performance of any

trading system or methodology is not necessarily indicative of future results.

CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN

LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT

REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE

RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN

MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN

GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF

HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY

TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

All Materials presented are for training purposes only . Traders should paper trade any new method

prior to risk of personal capital.

All Materials Copyrighted ATTS 2007-2015

Disclaimer


Big Part of Convergence of Clues?

• Establishing the Convergence of Multiple Clues provides objective measurements for trades with improved probabilities

• Provides greater understanding of expectations

• Helps Minimize Risk & Maximize Profit

Today’s Objective: Provide a simple means of grading potential set ups before pulling the trigger! Combining the clues of candlesticks, support/resistance, momentum and moving averages


Primary & Best Clues that Must Converge for a

Higher Probability Trade

Price Related Clues: Major Clues

Horizontal Support Zones

Horizontal Resistance Zones

Trend Lines

Flag Lines

Moving Averages for Trend

Moving Averages for Support

Moving Averages for Resistance

Candlesticks

Other Clues: Extremes on Indicators & Divergence


Looking for Clues & Connecting The Dots

Before taking a Bullish Reversal Signal during a Downtrend

o At least two or three clues must converge (be observable)

Before taking a Bearish Reversal Signal during a Uptrend

o At least two or three clues must converge (be observable)

During a Uptrend or Downtrend to trade in the direction of the Trend

o At least one additional clue must converge with the candlestick pattern


Candlestick History

Charting method originating In Japan between the 18th century & late 1800’s

Potentially used by Japanese Rice Traders

Introduced to Western Traders by Steve Nison in the 1990’s

Knowledge base and trading importance expanded by Steve Bigalow


Candlestick Basics

Candles and Technical Analysis go together

Powerful Tools – Only partially understood by most traders

Immediate feedback on investors sentiment

Greatly improve Reward/Risk on every trade in all time frames

Be a detective – Look for the Convergence of Clues

Presentation Material by: Active Trend Traders


Golden Rule of Candlesticks

Candlesticks and patterns require three criteria for

proper interpretation:

1. A Completed Line (Must wait for the time period to finish!)

2. Shape of the line or pattern

3. The Preceding Trend


What’s the Difference?

Bar Chart vs Candlesticks

Open

OpenClose

Close

Bullish Bearish

Low

High


Primary & Best Candlestick Signals

There are many, many Candlestick Patterns but these represent the Primary & Best

Indecisive

Doji's/Spinning Tops

Bullish Bearish

Hammer Hanging Man

Engulfing Patterns Engulfing Patterns

Piercing Line Dark Cloud

Harami Harami

Inverted Hammer Shooting Star

Morning Star Evening Star

Kicker Kicker


The Dynamic Doji—Watch for Small Bodies

- Doji’s and Spinning Tops show indecision between buyers & sellers—Neither side is in control!

- Clues: When present at past support/resistance or moving averages with indicator extended or divergent

- Price Action will tend to move in the direction of the open after a Doji/Spinning Top


Doji/Spinning Top Bullish

Series of Doji’s at Support

Clue: TSI Cross & Momentum Divergence

26%+ Move from Signal to High in one month

&

How Many Clues?

Would be comfortable trading this of support at $62?


Be a Detective: Search for Clues

12

3

How Many Clues?1. Series of Doji’s2. Strong Support?3. Crossing & Divergent

Indicators

4. Break Above 8 day EMA


Conclusion of Part 1


Candlesticks A Review · Introduced to Western Traders by Steve Nison in the 1990’s Knowledge...

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Transcript of Candlesticks A Review · Introduced to Western Traders by Steve Nison in the 1990’s Knowledge...