The power of candlestick signals in the markets can be traced back to the 16th century.
Candlesticks were used back then, just as they are today,
by technical traders and analysts to read market behaviour,
which is heavily influenced by supply and demand, as well as emotions like greed and fear.
We will first take a brief dive into the history of candlesticks, and then
I’ll show you four powerful candlestick signals that still work today—signals I personally use to identify high-probability bullish or bearish entries.
History of Candlesticks: The Power of Candlestick Signals
In the 18th century, a legendary Japanese rice trader named Munehisa Homma developed the Japanese candlestick method to track price movements.
It is important to note that during this time, the rice market dominated the financial markets.
Rice was so significant that it played a major role in Japan’s economy.
Munehisa Homma’s early work on candlestick charting, which incorporated
human emotions such as greed and fear, market behaviour, and even weather conditions, dates back to the mid-17th century during the Edo period.
The Power of Candlestick Signals Invented by Homma
It is important to note that the candlestick patterns created by Munehisa Homma continue to help technical traders today by providing a visual representation of the market.
These patterns offer signals that help traders determine areas of high or low bullish and bearish activity, as well as potential reversals or continuation zones.
Historical records indicate that Homma developed these candlestick patterns based on his Sakata Rules.
Some of the candlestick patterns he introduced might sound familiar, such as the Doji, Hammer, Engulfing, and Spinning Tops, among others.
If these patterns are new to you, don’t worry—I’ll be covering a few of them that I personally use to gain an edge in the market.
The Power of Candlestick Signals: 4 Powerful Candlestick Patterns
Now, we dive into four powerful candlestick patterns that I use to achieve highly accurate price predictions in the market, allowing me to yield rewarding long-term returns.
But before we do that, let’s define what a candlestick is and what it consists of.
By understanding the anatomy and psychology of candlesticks,
it’s like visiting a foreign country and being able to communicate in its language.
Having this ability allows you to navigate that country with ease,
unlike relying on time-consuming methods to find your way around.
The same applies to technical trading—when you understand the language spoken by candlesticks,
you can navigate price movements with greater confidence and accuracy.
What is a Candlestick?
A candlestick, as I mentioned earlier, is a visual representation of price movement,
available across different timeframes (4-hour, 1-hour, 30-minute, etc.).
Candlesticks provide valuable information, including the opening price,
closing price, highest price, and lowest price over a specific period.
For those unfamiliar with candlestick structures, I will provide a video link later in this blog to illustrate how they appear.
I use candlesticks in combination with trends, key levels, and support and resistance zones.
You will see exactly how this works when I discuss pattern formations for entries.
Another key aspect to pay attention to is the colour scheme of the candlestick.
When the bulls (buyers) are in control, the candlestick typically appears white or green.
When the bears (sellers) are in control, the candlestick is usually black or red.
Personally, I use the green/red colour scheme, but the colours can be customized to your preference—it doesn’t really affect the analysis.
Benefits of Using Candlesticks Over Other Chart Types
One major advantage of using candlesticks instead of other chart types,
such as line charts or bar charts, is their compatibility with trendline strategies and support or resistance zones.
A technical trader who understands candlestick patterns can capitalize on market reversals,
such as bullish engulfing patterns forming at a support zone.
These patterns provide strong buying signals, indicating that sellers
have exhausted their momentum and that strong buying pressure is about to take over.
As you will see, my ability to read candlestick patterns gives me an edge in uncovering hidden market signals.
Take note: If you lack the ability to read candlesticks, it will be much harder to spot these signals and make informed trading decisions.
The Power of Candlestick Signals: 4 Powerful Candlestick Patterns
Now, let’s explore four candlestick patterns that I use to anticipate future price movements.
By understanding these patterns, you will be able to spot high-probability
reversal entries and continuation-based buying and selling opportunities.
Bullish Engulfing Pattern
The bullish engulfing pattern is one of my favourite candlestick patterns for capitalizing on strong bullish momentum.
There are two key ways I use this pattern for high-probability trade setups:
Reversal Setup: I look for bullish engulfing patterns forming at support areas (law: we buy at support) within a zone or trendline.
Since bullish engulfing patterns act as reversal signals, their presence at key support levels increases the probability of a successful trade.
Continuation Setup: I also use bullish engulfing patterns when looking for market continuations. For example, when price breaks above resistance, a break-and-retest scenario may turn previous resistance into new support. If a bullish engulfing pattern forms at this retest area, it signals strong buying activity and a potential continuation of the uptrend.
How a Bullish Engulfing Pattern Forms
A bullish engulfing pattern consists of two candlesticks:
The first candlestick is small and bearish (indicating weak selling pressure).
The second candlestick is large and bullish, fully engulfing the first one (indicating strong buying momentum).
Example of a Bullish Engulfing Trade setup
In the diagram of my trading setup:
Candlestick 1 was a bearish candle that touched the support zone and support trendline.
Shortly after, Candlestick 2 fully engulfed Candlestick 1 with a strong bullish candle, confirming the reversal.
This setup provided a high-confidence buy signal,
showing the importance of understanding candlestick patterns and how they align with market structure.
2. Bearish Engulfing Pattern
Similarly, the bearish engulfing pattern acts as both a reversal and continuation pattern.
There are two ways I use this pattern for high-probability trade setups:
Reversal Setup: I look for bearish engulfing patterns forming at resistance areas (law: we sell at resistance) within a zone or trendline.
Continuation Setup: I also use bearish engulfing patterns when the price breaks below support and then retests it. In this scenario, a bearish engulfing pattern at the retest area suggests strong selling pressure and a continuation of the downtrend.
How a Bearish Engulfing Pattern Forms
A bearish engulfing pattern consists of two candlesticks:
The first candlestick is small and bullish (indicating weak buying pressure).
The second candlestick is large and bearish, fully engulfing the first one (indicating strong selling momentum).
Example of a Bearish Engulfing Trade setup
In the diagram:
The market was previously trending upward until the last bullish candlestick formed at a resistance zone and trendline (high-quality signal).
This was followed by Candlestick 2, a strong bearish candle that fully engulfed the last bullish candlestick.
This confirmed that selling pressure was taking over, leading to a market drop—a perfect sell opportunity.
3. Morning Star Pattern
A Morning Star pattern is the third pattern I use as an indicator
for high-potential reversal and continuation bullish entries.
It consists of three candlesticks. Similarly, to the bullish engulfing pattern,
I wait patiently for the market to make its way to the support zone or trend.
After the Morning Star pattern has developed, I start buying indices, commodities, currencies, etc.
Now, let’s look into how I capitalize on a continuation scenario.
In a situation where I can identify that bullish momentum is going to break a resistance area,
I patiently wait and allow the market to prove my theory correct.
After it does (the market breaks resistance, turning the zone into new support),
I wait for a retest that can take the form of a Morning Star. Once the pattern has taken shape,
I enter with my high-probability trades.
How a Morning Star Pattern Forms
A Morning Star candlestick pattern consists of three candlesticks:
The first candlestick is a strong bearish candlestick that closes at the support. This candlestick indicates to technical traders that the market is still heavily dominated by sellers.
The second candlestick forms right after the first. Its body is much smaller than the first candlestick and can close either bullish or bearish. The key takeaway is that it signals that sellers are losing momentum.
The third candlestick is a very strong bullish candlestick that is greater than the second candlestick and must cover at least half of the first candle.
Example of a Morning Star Trade Setup
In the diagram:
The market was trading downward until it reached the support level with a strong bearish candlestick (marked 1), indicating that sellers were in control.
The second candlestick (marked 2) formed as a small bullish candlestick known as a hammer. As seen, this candlestick is much smaller than the first, signalling that sellers are losing momentum.
The third candlestick (marked 3) formed as a bullish candlestick larger than the second candlestick and covering more than 50% of the first candlestick. This alerts us to strong buying pressure, leading to a potential buy setup.
4. Evening Star Candlestick Pattern
Similarly, to the bearish engulfing pattern,
an Evening Star candlestick pattern can act as a reversal or continuation pattern,
which I also use for sniper entries. Sniper entries are well-timed trades with little to no market drawdown.
Another way to achieve a high trading outcome using this pattern
is when selling pressure breaks through a support area, turning it into new resistance.
When this happens, I patiently wait for the market to retest,
which can take the form of this pattern. When it does, it’s a strong signal to enter sell trades.
How an Evening Star Pattern Forms
An Evening Star candlestick pattern consists of three candlesticks:
The first candlestick is a strong bullish candle as it approaches resistance, suggesting to a technical trader that buyers are still strong during that period.
The second candlestick follows after the first and forms a small bearish or bullish candlestick, indicating that buyers are losing momentum.
The third candlestick is a strong bearish candlestick that is greater than the second candlestick and must cover at least 50% of the first candlestick.
Example of an Evening Star Trade Setup
In the diagram:
The first candlestick (marked 1) shows that buyers were in control during that period, and the market momentum was bullish.
The second candlestick (marked 2) closed as a bearish candlestick, signalling that buyers were losing momentum.
The third candlestick (marked 3) is a bearish candlestick with its open and close price lower than the second candlestick. Even though the candle’s body did not cover 50% of the first candlestick, its close was below 50%, confirming our Evening Star pattern. This would have been a high-probability setup, leading to a selling opportunity.
By understanding these candlestick patterns
and their formations, traders can make informed decisions and capitalize on high-probability setups in the market.
The Power of Candlestick Signals: Conclusion
As we have discussed, being able to read candlestick patterns helps you make sense of what price is telling you.
If you understand the language, you will be able to uncover its secrets. I have shared with you four powerful candlestick patterns:
Bullish Engulfing, Bearish Engulfing, Morning Star, and Evening Star.
There are many more out there, and you can dedicate time to finding patterns that work best with your strategy.
Developing this skill will allow you to read the market with ease over time. If you made it to this part,
I want to congratulate you—this shows you can start something and finish it. Trading is a personal journey, and traders who
are prepared always come out on top. It is always important to keep growing and learning rather than repeating the same mistakes.
If you want to learn more about other important traits needed to become a profitable trader,
My goal with today’s piece is to teach you how to protect your trades from manipulations.
To fully master this pure technical skill, one first needs to understand why
market manipulation occurs and who is responsible for its occurrence.
Since I’m a pure technical trader who does not use news or any other form of indicators,
I’ll teach you how traders like me navigate through this deception, which is designed to target retail traders.
Protect Your Trades from Manipulations: Overall Market Direction
On my YouTube channel, I always emphasize the importance of trading with the overall market direction.
The reason why most traders don’t adhere to this principle is their desire to trade every day (a lack of patience).
This is exactly what market manipulators want,
as they use it to take money from retail traders and into the pockets of the elites.
The Oracle of Omaha, Warren Buffett, is often paraphrased as saying, “The stock market is a device for transferring money from the impatient to the patient.”
involving the artificial inflation of a security’s price using false or exaggerated claims.
Hedge funds employ this tactic to maximize profits with minimal risk.
Here’s how it works:
Hedge funds enter a large buy position to inflate the stock’s price, causing volume indicators to attract retail traders.
Retail traders mistakenly interpret this activity as a signal to buy, pushing the price even higher.
Hedge funds sell their positions near the peak, leaving retail traders to bear the loss as the price plummets yet again making millions in the process.
How Market Manipulation Targets Retail Traders: Central Banks
Central banks also influence markets, often for macroeconomic goals rather than profit.
However, their actions still impact retail traders.
Increasing Interest Rates
When central banks raise rates to control inflation, borrowing becomes more expensive
for consumers, small businesses, and corporations.
This decreases market activity, driving stock prices down but strengthening the currency.
Cutting Interest Rates
Conversely, central banks lower interest rates to stimulate borrowing and spending.
This boosts stock market activity but devalues the currency.
Such strategies can indirectly manipulate markets, as seen during the 2008 financial crisis
when central banks injected billions into the economy through quantitative easing.
How Market Manipulation Targets Retail Traders: Market Makers
Market makers, also known as liquidity providers, are essential for market operations,
but they also manipulate prices to profit from retail traders’ losses.
The Spread: Bid and Ask Prices
Market makers profit from the spread—the difference between the highest price a buyer is willing to pay (bid)
and the lowest price a seller will accept (ask).
This explains why trades often start with a small loss immediately after being executed.
Stop-Loss Hunting
Stop-loss hunting, often in the form of bull raiding or bear raiding,
involves placing large buy or sell orders to trigger stop-loss levels.
For example, market makers may push prices
above resistance to bait retail traders into entering buy positions.
Once stop-loss levels are placed just below resistance,
market makers inject large sell positions,
triggering the stop losses and causing further price declines making the markers millions from their short position.
How Market Manipulation Targets Retail Traders: Conclusion
Market manipulation is pervasive, with hedge funds, central banks, and market makers
all playing a role in targeting retail traders. However, with the right strategies and an understanding
of how the game is played, it is possible to join the small percentage of retail traders who achieve long-term success.
The key is staying disciplined, avoiding emotional decision-making,
and adapting to the realities of a market stacked against you.
I remember two years ago when I was about to apply the concept of aligning trading patterns and principles.
My patterns, key levels, zones, trends, and impulse correction theory did not align at first.
They seemed to tell me different stories. For example, I would analyse a currency pair and spot a W pattern (indicating potential reversals for buying opportunities),
but at the same time, my key levels would signal a different narrative—price at a resistance level (indicating selling opportunities).
This contradiction left me wondering whether to buy or sell. I didn’t know—I only knew I had to enter the trade (FOMO took over). This lack of alignment led me to lose hundreds of dollars.
What It Takes to Master Alignment
The secret to mastering alignment is you. Unfortunately, that’s why many forex traders, whether they’ve been trading for months, years (unsuccessfully),
or have recently joined the industry, will never become profitable traders. The reason is simple: you are the key.
To effectively use patterns, trends, and key levels, you must master each concept and understand it inside out. Otherwise, you will struggle to align all these principles.
Your inability to stay focused and consistent will lead to failure. You need to have a deep conversation with yourself to assess if the way you are living or trading aligns with these principles.
If it doesn’t, make the necessary changes. As I mentioned earlier, your inability to stay focused and consistent will lead to failure.
Avoid These Behaviours
The reason many traders remain unprofitable, even after years of trading, is a lack of discipline, consistency, and problem-solving skills.
If you don’t learn from your losses or mistakes and keep repeating the same behaviours, you’ll find yourself stuck with a mountain of losses.
This stagnation prevents growth and evolution as a trader, no matter how long you’ve been in the industry. Don’t let yourself fall into that trap.
A lot of new traders fail because they enter the industry with unrealistic expectations of becoming millionaires within weeks or months.
I’ve been there, too. This mind-set is why many of them quit or never reach the next level.
Aligning Trading Patterns and Principles: How I Did It
As I mentioned, two years ago, I felt conflicted when my market patterns and principles didn’t align.
Instead of blaming my strategy, the market, or the market makers (as I often did back then), I acknowledged the problem and focused on finding solutions.
After months of losses, I went back to the drawing board and began by perfecting trends.
The more I analysed my setups and revisited them later (hours, days, or weeks), the easier it became to spot what I was doing wrong and what I was doing right.
Over time, this approach helped me understand trends effortlessly.
I applied the same method to patterns and principles, addressing each concept individually.
It wasn’t easy, but consistent practice, detailed note-taking, and determination helped me navigate through the challenges.
Eventually, I saw the light at the end of the tunnel. Always remember: focus on the skill, and the money will come; but focus on the money, and it won’t come as easily.
I made a habit of working diligently every day. I became so committed to perfecting my strategy that I stopped wasting time on distractions like partying.
The less attention I paid to the outside world, the better I became at aligning trading patterns and principles.
Aligning Trading Patterns and Principles: Step-by-Step
The reason I cover every topic individually in the Strategic Trading Academy is so you can thoroughly understand the principles of each concept—such as traditional trends, M&W reversal patterns, and trading psychology.
Once you achieve mastery, here’s your step-by-step guide to achieving total alignment:
Step 1: Trends
By this stage, you should have a clear understanding of how to apply trends. You should know which timeframes to use for analysis.
Placing trends on the daily chart helps me determine if the market momentum is bullish or bearish. I then add trends on lower timeframes (4-hour or 1-hour charts).
Step 2: Key Levels
Next come key levels—critical points in the market where price reversals might occur.
At resistance levels, we look for selling opportunities; at support levels, we look for buying opportunities.
These levels are essential because they define my “playground,” giving me an idea of the potential pips I could gain over different timeframes (hours, days, weeks, or months).
By marking key levels on daily and 4-hour/1-hour charts, I can better predict whether a trend might reverse or break.
When trends and key levels align—for instance, when a bullish market is at a support level—it reinforces my confidence in my analysis.
Step 3: Zones
Zones, like key levels, are areas in the market where price reversals or continuations are likely.
The difference is that zones allow you to account for more price activity, enabling more informed decisions before entering a trade.
I apply zones on lower timeframes, such as 4-hour or 1-hour charts. Testing these tools extensively will help you understand what works best for your trading style.
For example, I used to create my playground using zones but later realized that it didn’t work for me in the long run.
Step 4: Impulse-Correction Theory
This is likely the easiest step. You need to train your eyes to spot impulsive and corrective price movements.
Consistent practice will sharpen this skill. Once your patterns, market levels, and zones align, allow the correction or pullback to occur.
When it breaks, enter the trade and capitalize on the impulsive price surge—provided it aligns with the previous steps.
Here’s an example of a trade I took on December 12, 2024.
This is total alignment all in one picture. As you can see, I used the W pattern along with the inverted head-and-shoulders pattern, which indicates a potential buying opportunity. I also incorporated zones (scaling in a new entry), a support key level, and impulse correction theory before placing my entries.
Aligning Trading Patterns and Principles: Conclusion
This is my blueprint. Use it as a guide to improve your trading skills. Never give up, and always learn from your mistakes—otherwise, you’ll keep repeating them.
You don’t have to follow my strategy exactly. Everyone’s trading experience is different.
If you prefer starting your analysis on a weekly timeframe or exclusively using zones, that’s perfectly fine.
This blueprint is merely a starting point. Over time, as you gain confidence, you can adapt and refine it to suit your style.
Repetition is how we, as humans, are programmed to learn.
The reason I encourage you to read that article is because it covers traditional channels/trends, and this piece serves as an extension to that topic.
What to Expect Going Forward
To best approach this piece (Mastering Expanding and Contracting Channels),
start by reading a section—for example, expanding channels. After reading the entire section on expanding channels,
use the link provided in that section.
The link will direct you to my YouTube channel,
where I’ll demonstrate how to spot and capitalize on these channels. Once you’ve watched the video,
move on to the next section (contracting channels).
By doing so, you’ll effectively combine both theoretical and practical lessons offered in this article.
Take Action as Soon as Possible
After understanding the logistics of expanding and contracting channels,
it’s time to take action. You might wonder: How do I take action?
Start by analyzing charts and training your eyes to spot these patterns.
Through repetition and consistency, you’ll learn to identify these patterns with ease.
Once you spot one, practice taking advantage of these setups using a demo account until you’re comfortable applying them in a live trading environment.
Mastering Expanding and Contracting Channels: Expanding Channel
On my YouTube channel, I always emphasize the importance of having two identical trends
when trading a traditional bullish or bearish trend, like in the example below:
However, this rule does not apply when trading expanding channels. Here’s an example of how they take form:
As you can see, the distance from support to resistance starts narrow but gradually
increases over time as the price moves between support and resistance.
An expanding channel acts as a consolidation pattern, and once it completes,
we typically see a strong impulse move—either to the upside or downside.
This is why I also encourage you to read my previous articles under The Strategic Trading Academy.
Just as a car requires various components to function optimally,
mastering what I teach requires you to study all the pieces I’ve written.
They work together to achieve maximum trading performance.
How to Capitalize Using Expanding Channels
There are two primary ways to capitalize on expanding channels:
Trading Within the Channel This is effective when the pattern forms on the 1-hour, 4-hour, or daily timeframe.
Trading the Breakout and Retest Wait for the market to break and retest the channel. Once the retest is complete, capitalize on the anticipated impulse move—either for buys or sells, depending on the overall trend.
CLICK HEREto access my YouTube channel, where I provide practical examples.
Mastering Expanding and Contracting Channels: Contracting Channel
A contraction is the exact opposite of an expanding channel. Instead of the price range expanding,
it contracts (narrows) as the price moves between support and resistance.
A contracting channel differs from a traditional channel or trend.
The trends are not identical but instead form a triangular pattern that slopes to the right.
Once the price contracts to its maximum, we typically
see a breakout—either to the upside (bullish) or downside (bearish).
A contraction acts as a consolidation phase, and once it completes,
we can anticipate a strong bullish or bearish impulse movement.
How to Capitalize Using Contracting Channels
There are two main ways to capitalize on contracting channels:
Trading Within the Channel This works when the pattern forms on the 1-hour, 4-hour, or daily timeframe.
Trading the Breakout and Retest Wait for the market to break and retest the channel.
After the retest, capitalize on the anticipated impulse move—either for buys or sells, depending on the overall trend.
CLICK HEREto access my YouTube channel, where I offer practical examples.
By understanding and practicing these techniques, you’ll enhance your trading precision
and take your technical analysis skills to the next level. Keep learning and refining your craft!
Mastering Expanding and Contracting Channels: A Key to Precision in Technical Trading
Mastering expanding and contracting channels is not just about spotting patterns—it’s about understanding market behaviour and positioning yourself for precision trades.
These channels provide unique opportunities to identify potential breakouts and capitalize on impulse moves.
By integrating theory with practice—whether trading within the channel or targeting breakouts—you can refine
your technical analysis skills and elevate your trading performance.
The journey to mastery requires consistent practice, repetition, and a commitment to learning.
Take the time to study these patterns, apply them in demo environments,
and gradually transition to live trading with confidence.
Remember, every successful trade begins with a solid understanding of price action and a disciplined approach.
Stay dedicated, keep evolving, and let expanding and contracting channels become a powerful tool in your trading arsenal.
Welcome back to the Strategic Trading Academy! In today’s lesson, we’ll focus on how to master the head and shoulders pattern. Previously, we covered trading the M and W patterns.
Why It Is Important to Understand the Basics of Patterns
Understanding the basics of patterns is crucial because it lays the foundation for successfully trading our strategies.
Inverted Head and Shoulders
To master the head and shoulders pattern, we must first recognize its appearance
on both support and resistance levels, acting as a reversal pattern.
An inverted head and shoulders pattern appears at a support trend, key level, or zone.
If this pattern appears elsewhere, it could be a trap set by market makers.
As I often emphasize on my YouTube channel, our Funds and Galore community focuses on high-probability setups
to gain an edge over the market and maintain consistency and profitability in the long run.
How to Capitalize on an Inverted Head and Shoulders Pattern:
To capitalize on an inverted head and shoulders pattern,
patience is vital. Allow the pattern to form in the support area. The sequence is as follows:
The market drops to the support area, forming the left shoulder.
Prices drop slightly lower, creating the head.
The right shoulder forms at the same level as the left shoulder.
This confirmation indicates that the market has created our bullish
inverted head and shoulders pattern, signalling high-probability buying opportunities.
To master this pattern, it is essential to backtest and understand these setups thoroughly,
ensuring you can capitalize on these high-probability opportunities.
How Do You Know When to Enter an Inverted Head and Shoulders Pattern?
A practical lesson will be available; to access it,
all you need to do is click the link provided in this blog post.
The question now is; how do we know when to place our entries?
The best way to approach this is by placing your entries after the break and retest
from the neckline of the head and shoulders pattern.
After this confirmation, you can place your buy entries until the end of the pattern (take profit),
and you can also place your stop loss just below the neckline.
Mastering technical analysis requires a solid grasp of price action. Price action refers to the movement of the overall market price.
Retail traders utilize price action to discern whether the market is bullish or bearish, using this insight to make calculated trades.
When an index like the Nasdaq is bullish, it simply means the market is trending upwards. Conversely,
when the Nasdaq index is bearish, it indicates that the market is trending downwards.
Retail traders who understand price action study past market trends to predict future market movements, enabling them to make informed and strategic trades.
Mastering Technical Analysis
Technical analysis encompasses various techniques that retail traders use to make calculated decisions on whether to buy or sell forex pairs (e.g., EUR/USD, GBP/USD) or indices (e.g., S&P 500, Nasdaq 100).
How Do Retail Investors Know When to Buy or Sell?
The reason many traders fail to make a profit is that they struggle to apply technical analysis effectively.
This prevents them from identifying whether they are strong buyers or sellers. It is crucial to trade with the market, not against it,
because we do not control the market—we only follow it. To understand the flow of price, one must first recognize that the market moves in three trends.
Bullish Trend
A bullish trend indicates that a specific stock, index, or commodity is performing well.
For example, when we observe a bullish market in Apple (AAPL) stock using technical analysis, it signals that retail traders should ideally look for buying opportunities (trading with the market).
Conversely, traders seeking selling opportunities in a bullish market are essentially trading against the market.
I personally do not recommend trading against the market. While it is achievable through practice,
I wouldn’t advise it, especially for beginners. I will teach you how I trade personally, not strategies I don’t use.
Bearish Trend
A bearish trend, identified through technical analysis, informs us that a specific stock, index, or commodity is underperforming.
On the other hand, traders seeking buying opportunities in a bearish market are trading against the market. Again, I don’t recommend trading against the market. Though possible with experience, it’s not advisable for those just starting out.
Consolidation Trend
The last trend you may encounter is a consolidation trend, which occurs when the market is indecisive.
This trend signifies a balance between sellers and buyers. Seasoned traders often watch for these trends as they can also be profitable.
Typically, after a period of consolidation lasting a week or so, the market often breaks into a bullish or bearish trend.
What to Expect: Mastering Technical Analysis
It’s important to recognize that trading is a game. Just like playing FIFA with friends, sometimes you win, sometimes you lose. Forex trading operates on the same principle.
A stop-loss and take-profit order empower you to manage your potential losses and gains effectively.
in forex, your goal is to outperform the market. How does one achieve this, considering only a mere 10% succeed? The answer lies in mastering technical analysis.
I’m excited to teach you how to use price action to your advantage, helping you become part of the successful 10%.
I will show you exactly how to trade in bullish, bearish, and even consolidation channels using technical analysis.
Mastering Technical Analysis: Support and Resistance
At resistance levels, traders typically look for selling opportunities because the market often reverses downward from these points.
Conversely, at support levels, traders look for buying opportunities because the market often reverses upward.
I continuously emphasize the importance of using stop-loss orders in my teachings.
Just as it is easy for us to identify these areas, market makers and institutional traders also target these zones to exploit traders who do not use stop losses,
are impatient, or do not know how to utilize these areas effectively. Market makers can legally manipulate these levels to close their own positions due to the size of their investments.
Warren Buffett once stated that the stock market is a transfer of wealth from the impatient to the patient, highlighting the importance of a disciplined and patient trading approach.
Impulse and Correction: The Power of Price Action
We have identified that the market moves in three trends: uptrend, downtrend, and consolidation trend.
While the market moves in these trends, it’s important to note that it also creates a series of impulse and correction moves.
An impulse move occurs when the price of a currency pair or index covers a wide distance in the market in a short period (buy/sell)
influenced by market volatility. Once you learn the technical approach required to successfully trade impulse moves, you will understand why I say volatility is your friend.
A correction, also known as a pullback or retracement, happens when the market temporarily changes direction to regenerate liquidity before continuing in its intended direction.
I sometimes place my entries (with proper timing and skill) during a correction (law: after a correction follows an impulse) to capitalize on the impulse move.
I will also cover advanced technical trading sessions later.
Conclusion: Mastering Technical Analysis: The Power of Price Action
Mastering technical analysis is about understanding the market’s movements and learning how to interpret price action to make informed trading decisions.
By recognizing bullish, bearish, and consolidation trends, and by strategically using support and resistance levels, retail traders can significantly improve their chances of success.
Remember, patience and discipline are crucial in trading, as highlighted by Warren Buffett.
Embrace the market’s volatility and learn to harness it through impulse and correction moves.
With dedication and the right approach, you can become part of the successful 10% of traders. Let’s embark on this journey together and master the power of price action in technical analysis.
