15/04/2011 - Top 10 Most Reliable Candlestick Patterns

Engulfing Patterns

The Bullish Engulfing pattern consists of a small black candlestick followed by a large white candlestick. The second day white candle opens below yesterday's low and closes above yesterday's high. The white candle must close near the top. The first day candle must be small and close down for the day.

This indicates that the presence of sellers, they are carefully accumulating. The second day candle opens below the first day range. Sellers that have missed the shorting on the previous day are jumping in. Buyers are panicking and cutting losses. Yet the day closes above previous day high, and closes on near the top for the day. Now all the short sellers are trapped. This is POWER.

Hammer Patterns

The Hammer pattern is a short candle with one long wick. It does not matter if the body is black or white. The long wick indicates that the sellers at one point were in so much control that the market crashed! Yet the day closed near the high of the day! The hammer is extremely powerfully if the low is a test of recent support, or a rejection of new low. I like to see it as a shakeout by insiders. Stop losses are triggered and the insiders accumulate buying.

Harami Patterns

The bullish harami pattern is a large black candle that closes down and also closes near the low of the day. The second day is a small white candle, and also an inside day where the range is entirely in the body of the first day. The first day shows that the sellers are very much in control but is losing momentum on the second day.

The harami pattern looks like a pregnant lady! Now the market is expecting something to happen and we do not want to miss it!

Piercing Patterns

The Piercing pattern a long black candlestick which close near its low, followed by a similarly long white candlestick that closes at least half way into the prior candlestick. The second day candlestick must close near its high. Traders that sold short on the first day are trapped. The result is a short squeeze.

Doji Patterns

The Doji is a small candlestick. The market opens and closes at or near the same price. The range of the day is small as well. The interpretation is that the market is indecisive. This pattern is extremely powerful if it is a gap down from the previous day, yet it makes no attempt to go lower.

This may signal a trend reversal.

Do you understand the 5 bullish candlestick patterns? As with Yin and Yang, there are only 5 bearish candlestick patterns that are worth trading. Bearish candlestick patterns are the opposite of bullish candlestick patterns.

Look at each of the bearish candle. Can you figure out why are they bearish?

How do I trade it?

These bullish candlestick patterns are reversal patterns. Only trade them if there is a clear downtrend!

I do not wait for confirmation. If I like the price action, I will initiate a position in the aftermarket session. Why? You need to be fast to profit from these signals. Waiting for confirmation means that other better traders are already in! We definitely want to be the traders that make up the pattern! We will offload our positions to traders that are late.

Please do not be afraid to trade. Do not hesitate to pull the trigger. Candlestick patterns are just entry techniques. Entry techniques are only a small part of trading. I like to keep my entries simple. I believe once we are in position, the battle is half won. Of course there are more to trading and we will get to that later.

Charts Updated

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Merry Christmas

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08/09/2011 - Bull Market In Gold Over With Double Top?

A few weeks ago I penned a public article and private forecast for my subscribers calling for a major correction in Gold being due. 72 hours after my forecast, Gold [ more ]