Forex candlesticks made easy

All rights reserved Unauthorised resell or copying of this material is unlawful No portion of this ebook may be copied or resold without written permission ForexCandlesticksMadeEasy.com reserves the right to use the full force of the law in the protection of its intellectual property including the contents, ideas, and expressions contained herein © Copyright ForexCandlesticksMadeEasy.com Copyright Notice © Christopher Lee All rights reserved Any unauthorized use, sharing, reproduction or distribution of these materials by any means, electronic, mechanical, or otherwise is strictly prohibited No portion of these materials may be reproduced in any manner whatsoever, without the explicit written consent of the publisher Disclaimer This report is designed to provide helpful advice regarding the subject matter(s) covered The author and distributors not engage in the practice of providing legal or professional advice and that the laws and regulations governing the subject(s) covered in this report may vary from state to state, and country to country It is understood that the author and distributors of this report specifically disclaim any liability that is incurred from the use, application, or recommendations of this report The author and distributors make no representations, warranties, or claims whatsoever regarding the accuracy, effectiveness, legality or completeness of the information included in this report, include any and all links, references, content, and recommendations therein The author and distributors shall in no way be held liable for any loss or other damages, including but not limited to special, incidental, consequential, accidental, or other damages Legal, professional, tax, accounting, and any other forms of advice should be sought from a professional and is in no way implied in this report Any and all links and recommendations are for instructional and informational purposes only and are not warranted or guaranteed for accuracy, content, reliability, or reputation, or any other expressed or implied purpose Content A Note from the Author Introduction Overview Section – Solitary Candlesticks Shaven candles and the Doji Long Shadows Multiple Shadows 10 Section – Relative Candlesticks 12 Relative Momentum Analysis 13 Reading Candle Patterns 15 Trick Candles – Profit taking 17 Time For An Exercise! 18 Section – Significant Price Formations 25 Double Top/Bottom 27 Triple Top/Bottom 27 Candle Reversal Patterns 28 Summary of Section 31 Section – Explosive Formations 32 Triangle formation 32 Channel formation 34 How To Trade On Breakouts 34 Bonus Section – The Time Frame Principle 38 Section X – The One Thing That Messes It All Up 40 Final Section – That's All There Is To It! 42 A Note from the Author Hi, this is Chris Lee from ForexCandlesticksMadeEasy.com and I’d like to congratulate you for taking the next step in furthering your Forex trading education! Candlesticks are one of the most misunderstood aspects of Forex trading, and this book was designed to teach you how to interpret them properly You’re not required to memorize anything here; instead, I’m going to show you how you can understand any market situation simply by looking at a bare trading chart Before we begin, there’s one thing I’d like to point out – the concepts that I’ll reveal in this book have been carefully presented to be as ‘easy to understand’ as possible However, please don’t confuse simplicity with ineffectiveness Indeed, the trick is in being able to understand, appreciate and translate these simple concepts into real profits By the time you finish reading this book, you’ll be light years ahead of your trading peers – most retail traders focus so much on technical indicators that they don’t realize the wealth of information that candlesticks alone can provide Congratulations once again for making the right choice To Your Trading Success! Introduction Being a trader is very much like being a detective imagine you're a detective who's trying to solve a murder case What's the first thing you'll need to do? You'll probably first have to conduct a general survey of the crime scene, question all the witnesses and try to determine the motives of the possible suspects This will give you a general idea of how, why, when, and by whom the crime was committed But that's not enough to solve the case, is it? 'General ideas' are just not enough You'll need to gather evidence to support your claims! And so you zoom-in on the details of the crime scene: you dust for fingerprints, carry out DNA testing, and go through the video footages of the murder taking place All these pieces of evidence need to point to the same suspect in order for him/her to be convicted of the crime Without the evidence, you can't solve the case So what has all this got to with Forex trading? You see, profitable trading involves this exact same process You'll first need to step back and take a look at the big picture: What's the current market trend? Where are the major support and resistance levels? What's the general outlook for the U.S Dollar for the next two months? These are all questions that will give you a rough idea of where the market is headed But just like in the 'detective' example, this information alone should not be convincing enough for you to take any action you'll need to zoom-in on the candlestick activity to confirm your 'suspicions' before you can safely place a high win-probability trade Yes, candlestick analysis is how you gather 'evidence' to support your trading decisions And once you understand how to properly interpret candlesticks, you'll be able to enter and exit the market with pinpoint accuracy for maximum profits That's what candlestick analysis can for you! One More Thing Remember that candlesticks never lie Don't listen to people who tell you the market is bearish when the candlesticks are telling you exactly the opposite Opinions can be wrong, but candlesticks are always right Pay attention to what the candlesticks are telling you, and you can’t go wrong Overview Here are the main candlestick concepts that we'll cover: Solitary candlesticks We’ll begin by first discussing candlesticks that have a special significance on their own These are single candles that convey a particular message about what’s happening in the market Relative candlesticks Next, we’ll look at how neighbouring candles can give you a better picture of the recent market price action If a single candlestick can reliably predict future market direction, imagine how powerful a cluster of candlesticks can be! In this section I’ll teach you how to read and understand relative candlesticks so you won’t have to memorize any candlestick patterns Significant price formations Once you’ve understood the underlying mechanics behind relative candlestick analysis, it’s time to expand our scope to even more significant formations; this time in relation to crucial price levels in the market Explosive formations The last of the core concepts, this section will provide you with incredibly reliable candle formations that have time and time again provided me with consistent profits These formations aren’t 100% accurate, but they’re pretty darn close! You’ve to see it to believe it Lastly, I’ll wrap up with a couple of key principles so you’ll get a complete picture of how to execute your trades with pinpoint accuracy Sounds good? I hope you’re as excited about this as I am So let's begin! Section Solitary Candlesticks This section is partially dedicated to the Shaven and Doji candlesticks I've provided this information for free on my website, and you can get it at: http://forexcandlesticksmadeeasy.com/downloadcandles.htm If you haven’t read the report, you might want to start from there and come back here when you’re done… (yes, go now!) Done reading? Great! By now, you should have learned (from the report) how important momentum is Throughout this book, please keep in mind how each of the concepts discussed here relates to momentum You’ll understand better and learn faster this way One more thing about the Doji before we move on – you may have noticed that the ‘hammer’ and ‘hanging man’ candlesticks look similar to it: After reading the report, you should know by now that these three candles mean either one of two things: lack of momentum, or indecision in the market These are candles indicate that a trend may be ending… However, they don’t necessarily mean that the trend is going to reverse You’ll need to have other candle confirmation signals before you can safety say that a trend reversal is likely to occur (we will look at these signals later) Let’s move on to the next important candle characteristic: Long shadows Long shadows Long shadows represent buyer/seller rejection A long top shadow means that the buyers in the market tried to push prices up, but the sellers were strong enough to push prices back down again A long bottom shadow means that the sellers in the market tried to push prices down, but the buyers were strong enough to push prices back up again A long shadow is evidence of how one side tried to push prices in their direction, but failed because the other side was stronger Here’s an example: We entered into a Buy trade a few days ago, and the market has been on an uptrend we're currently in-the-money! Suddenly, we see a long top shadow form right at the top of the market: Phew! Did you see how fast the price dropped? Thank goodness we took our profits before this happened! At this point you might like to open up your trading charts and see if you can find more of such examples; I’m sure you’ll see many similar setups As you can see, long shadows serve as an indicator of the comparative strengths between the buyers and the sellers They indicate a high chance of market prices going in the opposite direction (of the shadow) One more thing: the longer the shadow, the more likely prices will move in the opposite direction of the shadow That’s about all there is to it Pretty simple, huh? But wait! There’s one exception… and that’s when multiple shadows are penetrating a support/resistance level Let's talk about multiple shadows next Multiple shadows Unlike a single long shadow, the presence of multiple shadows usually indicates the weakening of support or resistance levels While a single long shadow indicates a likelihood of prices moving in the opposite direction of the shadow, a cluster of multiple shadows indicate that prices are likely to move in the same direction as the shadows Confused? Let’s look at an example… Here, we see multiple shadows trying to penetrate a support level Also note that the closing prices are getting lower and lower What this means is that the sellers are aggressively testing the strength of the support level In instances like this, the buyers are looking weak! I would expect the sellers to overpower the buyers soon… 10 Final Section That’s All There Is To It Yep That’s all there is to it Congratulations on making it this far! You now have access to all the candle analysis techniques that I personally use to profit from the Forex market These are concepts have been carefully chosen and explained to give you the best chance of profiting… so please follow them carefully! “What about all the other candlestick formations?” I know, I know… you’ve probably heard about the ‘head and shoulders’ or some other more commonly-known candlestick formation The reason why I didn't discuss them here is because I’ve found them to be rather unreliable in the Forex market You see, compared to the other financial markets, price movement in the Forex market is much more volatile What this means is that only the most simple and dramatic candlestick formations will have a significant impact If you know how to trade with the ‘head and shoulders’ formation, then please go ahead… I’m not saying that it’s unprofitable to trade with… I just prefer to ignore it because I feel there is simply too much random price movement in the Forex market for such a complex formation to hold any particular significance And this goes for the other candlestick formations as well 42 Thanks For Reading Thank you so much for taking the time to read and understand this book I hope you’ve gained some valuable insights that will give your trading career a big boost! ☺ If you have any questions or problems, just drop me an email at: chris@forexcandlesticksmadeeasy.com Take care, and I’ll talk to you again soon! Best wishes, 43 All rights reserved Unauthorised resell or copying of this material is unlawful No portion of this ebook may be copied or resold without written permission ForexCandlesticksMadeEasy.com reserves the right to use the full force of the law in the protection of its intellectual property including the contents, ideas, and expressions contained herein © Copyright ForexCandlesticksMadeEasy.com Copyright Notice © Christopher Lee All rights reserved Any unauthorized use, sharing, reproduction or distribution of these materials by any means, electronic, mechanical, or otherwise is strictly prohibited No portion of these materials may be reproduced in any manner whatsoever, without the explicit written consent of the publisher Disclaimer This report is designed to provide helpful advice regarding the subject matter(s) covered The author and distributors not engage in the practice of providing legal or professional advice and that the laws and regulations governing the subject(s) covered in this report may vary from state to state, and country to country It is understood that the author and distributors of this report specifically disclaim any liability that is incurred from the use, application, or recommendations of this report The author and distributors make no representations, warranties, or claims whatsoever regarding the accuracy, effectiveness, legality or completeness of the information included in this report, include any and all links, references, content, and recommendations therein The author and distributors shall in no way be held liable for any loss or other damages, including but not limited to special, incidental, consequential, accidental, or other damages Legal, professional, tax, accounting, and any other forms of advice should be sought from a professional and is in no way implied in this report Any and all links and recommendations are for instructional and informational purposes only and are not warranted or guaranteed for accuracy, content, reliability, or reputation, or any other expressed or implied purpose A Note from the Author Hey there – this is Chris Lee from ForexCandlesticksMadeEasy.com Over the past weeks I've been receiving requests from many of my subscribers to share some of my candlestick analysis techniques and so this report is a way of saying 'Thank You' to all of you who have been supporting me I sincerely value your opinions and would like to share with you as much as I can about the trading techniques that have been profitable for me As usual, please don't hesitate to send me any of your questions or comments regarding any of my reports I'd love to hear what you think of them! Best regards, Just to clarify… This report was written with the Forex market in mind Although Japanese candlesticks are often used as an analysis tool in many other trading markets, the concepts that I'll reveal in Section and of this report are specifically with reference to the currency market This being said, I will also teach you how to read and understand the basic principles behind candlesticks in Section This is a universal concept that can be applied to other financial markets If you think you already understand candlestick basics, please think again Candlesticks reveal more information than just the opening and closing prices of the market Read on, and I hope you learn something new :) The rest of this page is left intentionally blank Section – Miracle Wax What are candlesticks? Candlesticks are graphical representations of market price movements within a specified time period A candlestick may represent price movement that occurred in the last minutes; 15 minutes; 30 minutes; hour; hours; day; week; or month for example This is what a candlestick looks like The thick portion is known as the real body, and the thin parts are known as the shadow Got it? Now let's now see what the real body and shadow can tell us about how market prices have moved Remember that each candlestick represents a specific time period? Let's assume the the candlestick to the right represents price movement in a hour period The 'open' would be the market price at the beginning of the hour The 'close' is the market price at the end of the hour The 'high' and 'low' are the highest and lowest prices that were traded within that hour, respectively You may have wondered at this point why the candlestick is green in colour Most trading platforms today will allow you the option to change the colour of the candlesticks that you see on your charts, so it doesn't really matter For the rest of this report, let's use green to represent a bullish candlestick, and red to represent a bearish candlestick What is a bullish/ bearish candlestick? A bullish candlestick represents market prices that are moving up If you look back at the hour candlestick (in the previous page), you'll see that the 'close' (end) price is higher than the 'open' (beginning) price This means that in that hour, the market has moved from the 'open' price, up to the 'close' price And now here's a bearish candlestick: Notice that a bearish candlestick is the opposite of a bullish candlestick: it shows how prices have moved down within the time frame that the candlestick represents Bearish candlesticks are usually represented by the colour red Special candlesticks Occasionally, you'll come across candlesticks that have no shadows, or have no real body These are very special candlesticks that can provide you with crucial information about here market price may be headed I will discuss more about these special candlesticks next Section – The Power of Momentum This is potentially the most important concept in Forex chart analysis If there's only one thing you can learn from candlestick analysis, I recommend that you learn about how to read momentum So what is momentum? Momentum is essentially a measure of how strong price movement is Try to answer this question: Which of these candlesticks show a stronger upward price movement? Using what you've just learned about how to read candlesticks, take a moment to think about your answer Turn to the next page when you've decided on your answer Did you guess candlestick 2? If you did, good job! So why does candlestick show a stronger upward momentum? Although both candlesticks have the same high-low price range, candlestick shows no hesitation in upward price movement Also, candlestick shows a higher closing price Here's an example of how prices moved: Can you see how candlestick shows the price moving straight up? This is an indication of a strong upward momentum Candlestick is often called a bullish shaven candle The opposite of a bullish shaven candle is called a bearish shaven candle (duh) But how does understanding price momentum help you make money in trading? Let's now look at an example of how shaven candles can help Here, we see a bearish shaven candle that is soon followed by a further drop in prices If you sold the market after seeing this bearish shaven candle, you would have made money! Now, if you open up your trading charts and take a look, you'll be able to find many similar instances where a bearish (or bullish) shaven candle is usually followed by a subsequent drop (or rise) in prices Go ahead and check out your trading charts now It's important that you're convinced of the strong influence of shaven candlesticks on furture price direction Turn over the page when you're ready All right Chris, I'm convinced But why are shaven candles so accurate in predicting the direction of future prices? The answer is because shaven candles indicate strong momentum in price movements In the above bearish shaven example, there was no shadow because the sellers in the market completely overwhelmed the buyers; the buyers couldn't drive the price up at all! The sellers were too strong And once the buyers are temporarily defeated, prices will continue to free-fall until the buyers can regain their strength and start pushing prices back up again Wow that's great! Are shaven candles 100% accurate in predicting future price movements? Nope Not a chance If it did then all traders would be rich by now Haha nice try Sometimes, shaven candles are immediately followed by prices moving in the opposite direction of them as is often the case during the release of certain economic news announcements For example, the moment the U.S GDP figures are revealed to be unexpectedly low, flocks of news traders all over the world will immediately enter into a SELL trade for the U.S Dollar This will likely result in a huge bearish shaven candle on the trading chart However, this bearish shaven candle will often be immediately followed by a strong bullish candle because the news traders will begin to take their profits by exiting their positions (thus driving price up again) So, if you come across a shaven candle during periods when important economic news is announced, yourself a favour and ignore it Shaven candles are good predictors of future price direction only when they have been 'naturally' formed by normal everyday trading activity Of course, shaven candles are not the only indicators of strong momentum in the market There are several other ways to identify the strength of market price movements However, shaven candles are one of the most reliable indicators that I've come across To summarize I hope you now have a good foundation of how momentum works the main point you should remember is that momentum is like throwing a stone: the stronger the initial thrust, the further the stone travels Likewise, the larger a shaven candle, the more likely (and further) prices will continue move in the direction of that candle However, you should ignore any shaven candles on the charts during times when important economic news is announced BUT! As with all other trading indicators and analysis tools, you should never, ever, ever (EVER) rely solely on candlestick analysis to trade This means that you shouldn't just blindly enter into a BUY trade the moment you see a bullish shaven candle Candlestick analysis is meant only to be one criteria out of the many trading criteria you should have in your own trading system Use candlestick analysis together with your technical indicators If you see a bullish shaven candle, but your other technical indicators tell you not to enter into a BUY trade, then please don't buy! In the next section, I'll discuss about markets with weakening momentum Section 3: When Momentum Is Lost When momentum is strong in the market, it's a good time to enter into a trade But when you exit the trade? The answer is when that momentum begins to slow down And as you might have guessed, the candlestick that best shows the lack of momentum is the Doji: On the trading charts, a Doji looks like a cross because the open price is the same as the close price; therefore, this candlestick has no real body at all A Doji can represent either one of two things: Buyers and sellers are equally strong Indecision in the market Buyers and sellers are equally strong When the buyers and sellers of the market are fiercely fighting each other, prices may not fluctuate much This is because both sides are equally strong at that point in time, and are caught in a deadlock However, the moment one of the sides starts to lose strength, the other side will usually push prices strongly in their direction Indecision in the market Sometimes when the market is behaving unpredictably, traders in the market don't know whether to buy or sell This results in a Doji candlestick on the charts because neither buyers nor sellers are strong they're both weak! This is the opposite of the (above) point when both sides are exerting strong buying/selling pressure How to trade using a Doji candlestick Many Forex books and websites claim that a Doji candlestick indicates a change in market direction Now that you understand the reasons for the formation of a Doji, you agree with what these books and websites say? Not necessarily, right? Whether or not a Doji indicates a possible change in market direction depends on the reason for the formation of the Doji For example, indecision in the market is unlikely to cause a change in market direction! Weak buyers/sellers will not be able to push price in any direction at all Summary By now, you should know that long shaven candles signify strong price momentum in the market, and that strong momentum is a good indicator of the direction of future price movements You also now know that a good time to exit your 'in-the-money' trades is when loss of momentum is observed in the market A Doji signifies a loss in momentum, although this does not mean that prices will definitely reverse in the opposite direction Never try to predict trend reversals (and enter the market) based on a single Doji candlestick! Thanks for Reading! That's all folks! I hope this report has been an informative read for you If you want the full book on simple but incredibly effective candlestick trading techniques, you can grab a copy now at: http://forexcandlesticksmadeeasy.com/ If you have any questions or comments regarding this report, just drop me a quick Email at: Chris@forexcandlesticksmadeeasy.com I'll talk to you again soon Take care, ... ForexCandlesticksMadeEasy.com and I’d like to congratulate you for taking the next step in furthering your Forex trading education! Candlesticks are one of the most misunderstood aspects of Forex. .. Solitary Candlesticks This section is partially dedicated to the Shaven and Doji candlesticks I've provided this information for free on my website, and you can get it at: http://forexcandlesticksmadeeasy.com/downloadcandles.htm... the market is bearish when the candlesticks are telling you exactly the opposite Opinions can be wrong, but candlesticks are always right Pay attention to what the candlesticks are telling you,