As a Price Action analyst and professional trader, I have always been paying special attention to candlestick patterns. All over the internet you might read about different candlesticks, candlestick pattern strategies, but rarely you will find useful information about proprietary candlestick patterns.
It's time to change that.
When trading different candlestick patterns, the objective is not only to focus on candlestick formations, but also s/r levels and breakouts. We should aim to catch the swings aligning them with historical buyers and sellers.
Brief Summary on Candlesticks
Candlestick trading analysis does not require knowing intricate formulas or ratios. Similarly, it does not require massive amounts of education to effectively utilise the signals. The signals and patterns of Japanese candlestick should be easy for all to see.
As illustrated above, a price closing higher than where it opened will produce a white candle. A price closing lower than where it opened creates a black candle.
The boxes that are formed by price action are called "the body". The extremes of the daily price movement, represented by lines extending from the body, are called "shadows or tails."
A price closing where it opened or very close to where it opened is called a "doji". Memorising Japanese candlestick names and descriptions of the candlestick trading formations is not needed for successful trading. Nevertheless, it is helpful for any price action trader.
Proprietary Candlestick Patterns
Most of candlestick patterns and formation were popularized by Steve Nison, but over the course of many years in the Forex market I have learnt some new candlestick chart patterns.
Having insight into the effect of these formations provides an opportunity to maximize returns. Some of those patterns I have developed myself, and some of them have been discovered by other traders.
I have been the creator of this pattern. The wordplay of Tarantula 89 or Tail 89 is effectively the inbar rejection of the 89 EMA. The price that shows T-89 pattern usually cues for the subsequent movement.
Pinbars have been one of my favorite patterns, and EMA 89 is my favorite EMA. This pattern is very strong, especially during trend movements where is presents a continuation.
Low Volatility Zone is one of the patterns that I presented on my candlestick webinars. The basis for this pattern lies in historical vs now moment concept. The basic premise is that the historical low volatility zone will also appear in now moment. Low volatility zone is presented by small bodies and wicks that marks the whole row of candlesticks.
- Identify Low Volatility Zone
- Mark the range
- Compare the "now" moment
- Wait for breakout.
Master candle is a concept known to most price action traders. Originally presented on Forex Factory, it has been further developed by me to suit my own needs and trading decisions.
The master candle is defined by a 30-150 pip candlestick that engulfs next 4 candlesticks. The 5th, 6th or 7th candlestick need to break the range in order for a breakout trade to become valid.
This concept will also be used on my Live Trading Session starting in February. A truly great candlestick pattern formation that we should definitely use on a regular basis.
Adam and Adam
Originally developed by Thomas Bulkowski, this pattern is a rejection pattern that can appear in both trend and downtrend. The chart pattern is a twin bottom pattern where "now" moment buyers are dominating.
It resembles W 1 2 3 formation but with more accent on buying pressure. We can see two distinct spikes at the bottom that look similar. Bottoms are narrow and V-shaped.
Stop Grabbers usually appear in volatile markets. What happens is, when the price spikes, it collects all the weaker stops above the resistance and below the support. The aftermath is a so-called "fade" that completely reverses the price.
We traders call it "fading the strength" or "buying into weakness". This is a trademark of main market movers.
By definition, bullish order block is the height of bearish candle prior to move up. Conversely, a bearish order block is the low of bullish candle prior to move down. I personally extended the definition by classifying order block just by bullish or bearish wicks.
This pattern was originally developed by Steve Nison in his "Candlestick Course". A high wave candlestick pattern is a series of small doji candles that are making a u-turn at the top or a bottom. This is a strong reversal confirmation and one of my favourites for trading countertrend setups.
These patterns and other important arsenal of trading tools will be used in my Wednesday's Live Trading Sessions, so feel free to join. No matter what kind of the trader you are, keep in mind that price action is the core of Forex trading and will definitely help your trading decisions.
Cheers and safe trading,