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Ultimate Candlestick Patterns Trading Secrets that no one tells you - Forex Day Trading - YouTube
Channel: TRADING RUSH
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Watch this... Which one do you think is the
Engulfing Candle Pattern out of these 3 Charts?
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Answer sounds pretty easy right? If you say
the third one, you are actually wrong but
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at the same time you are also correct. Trading
is not always a yes or no statement. In reality,
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trading is so complex that this question will
get two different answers. Many will say it's
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this one, but there will be some who will
say all of them are the same picture. And
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the thing is, both of them are right. To understand
why some traders will say something strange,
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when the third one clearly has the engulfing
pattern, we will first have to understand
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what the engulfing pattern actually means,
and how it is formed. Let me explain.
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In one of the previous videos, we tested the
Engulfing candlestick pattern 100 times, and
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found out that the engulfing works more than
50 percent of the time, and price actually
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goes in the direction of the engulfing candle.
If you haven't watched that video, maybe consider
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watching it after this video. And Subscribe
to the Trading Rush Channel and ring that
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notification bell, because we test many different
trading strategies 100 times to find if they
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work or not, and you don't want to trade with
a strategy that doesn't even work in the long
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run.
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Many people consider the Engulfing Candlestick
pattern to be one of the important candlestick
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patterns, because it can tell a lot about
the buyers and sellers in the market. For
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example, let's say price is making red candles
in a downtrend. If it is making red candles,
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there is a selling pressure, or in other words,
there are more sellers who are willing to
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sell at the current price. Sellers are ruling
the market and some buyers are not interested
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in participating as multiple red candles are
forming in a row. But then, for some reason,
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price makes a big move up, and completely
engulfs the previous candle. For some reason,
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let's say because the price touched a strong
support area, many buyers got interested in
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buying in this area. The buying pressure was
so high, that buyers completely took over
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all the sellers from the last two candles.
But hold on a minute, according to this theory,
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an engulfing candle was formed, because more
buyers were interested in buying when this
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candle was forming. But what if the same number
of buyers bought at the same prices, but a
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little bit slowly. This is a screenshot of
a forex pair on the 15 minutes timeframe.
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If the same number of buyers would have bought
the pair a little bit slowly, two 15 minutes
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candles would have formed instead of one.
But hold on a minute, if the same transaction
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took place, and the same number of buyers
and sellers participated on both these charts,
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these two charts tell the same story right?
and the only difference is the time? Well,
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you are absolutely right!
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Candlestick pattern tells you a story about
what happened in the last few candles. And
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the bullish engulfing patterns shows you that
buyers took over the sellers. But what many
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beginner traders don't pay attention to, is
the time. Your engulfing pattern is limited
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to your chart timeframe. If you look at the
charts on the 15 minute timeframe and an engulfing
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pattern forms, it indicates that buyers in
the last 15 minutes took over the sellers
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from the 15 minutes before that. This information
is good, especially if the engulfing pattern
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forms near a support area. Let's say you are
waiting for the price to reach your support
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level, you are waiting for some kind of entry
signal, like a candlestick pattern to form
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near the support area. If an engulfing pattern
appears, good for you, now you have an open
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position, let's hope it makes profit. Oh look
at that, it made a profit. You took a trade
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using an engulfing pattern and it worked.
But what if, instead of engulfing the last
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two candles in 1 15 minute candle, it doesn't
move much for the first 13 minutes, and starts
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to make a big move up in the last 2 minutes.
Since you were focused on your 15 minute timeframe,
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buyers according to you, got interested in
buying at the end of this candle. When the
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price started to go up, the 15 minute candle
ended, and a new 15 minute candle appeared.
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So the upward move continued on the next 15
minute candle. Now, no engulfing pattern was
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formed, even though the same number of buyers
and sellers participated in this upward move.
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At the start of this video, when I asked which
one is the engulfing pattern, If you said
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only the third one, then you would have missed
this trading opportunity and the profit, because
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there was no candlestick entry signal.
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If you answered that all of them are telling
the same story, then you would enter this
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trade right here, because you saw that buyers
still took over the sellers just like they
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would in a engulfing pattern. And the only
reason you don't see an engulfing pattern,
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is because one candle ended and the other
one started when the price started the big
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move up. Furthermore, we can still see that
this is an engulfing pattern, if we switch
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to the 30 minute timeframe. Since you were
watching the chart on the 15 minutes time
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frame, these two candles were formed on the
15 minutes time frame. So on the 30 minute
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timeframe, these two candles will be one big
engulfing candle.
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The reason I said the first question will
get two different answers was because, these
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two charts tell the same thing but on different
timeframes. If you have a little bit of experience
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in reading trading charts, you can tell that
they are telling the same story. On the 15
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minutes time frame, one red candle was formed,
and then a big candle completely engulfed
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it. But if you look closely,聽on the 5 minutes
time frame, price was moving slowly in the
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downward direction. It took 5 candles just
to make this small downward move. But then
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suddenly, in just two candles, price made
an upward move, that was higher than 5 candles.
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If two candles made a move, that took more
than 5 candles to make, by only looking at
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the 5 minutes timeframe, you can imagine that
this price action will form an engulfing pattern
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on the higher timeframe. Similarly, if it
took three 15 minutes candles to make this
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move, where the price ended approximately
where it started, you can imagine how the
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same price action will look combined on the
higher timeframe.
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As you can see, all three charts I showed
at the start, are from the same forex pair,
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just the timeframe is different. And now you
can see how they all are telling the same
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story. That's why both of the answers are
right. Only the third one is the engulfing
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pattern, but if you look at charts differently
and imagine how it will look to different
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traders on different time frames, for you
they are the same thing, because they are
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pretty much telling the same story.
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But how to use this information to our advantage?
Instead of showing you a random trade, I will
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show you the trade I actually took on the
6th of November. This is the trade I shared
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on the Trading Rush Patreon Page on the 6th
Nov. As you can see, at first, I took a short
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trade but the price touched the stoploss immediately.
But right after my stoploss was hit, price
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had a big rejection from the resistance area.
The two 5 minutes candles at the resistance
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area looked like this. And if you imagine
how they will look on the 10 minute timeframe,
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you can see that the resulting candle looks
like another candlestick pattern. And this
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candle opened below the resistance area, tried
to go above the resistance area, had a big
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rejection from above, and closed below the
resistance area. In simple words, even though
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it looks like the price has crossed above
the resistance and is going to go up, it is
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actually showing signs of going down. So I
took another short trade, and this time it
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made a profit, because the price made a move
down. Furthermore, the previous loss was recovered,
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because the trades achieved a 2.5 times more
profit than the loss.
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So the point is, candlestick patterns in trading
can give a lot of information about the price
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movement, but always remember how they are
formed and don't ignore the hidden candlestick
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patterns. Because then you might see what
many beginners don't.
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That's all. Like the video if you liked it.
Subscribe and ring that notification bell,
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to see more trading strategies, and different
indicators tested 100 times to find their
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win rates. After all, you don't want to risk
your money on a strategy that doesn't work
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at all.
Maybe consider supporting the Trading Rush
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channel on Patreon and see my trade analysis.
And thanks a lot for watching.聽
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