The Art & Science of Active Trend Trading
Candlesticks—A Review
Copywrite ATTS 2007-2015 1
U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures
and Options trading has large potential rewards, but also large potential risk. You must be aware
of the risks and be willing to accept them in order to invest in the futures and options markets.
Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to
Buy/Sell futures or options. No representation is being made that any account will or is likely to
achieve profits or losses similar to those discussed in this training. The past performance of any
trading system or methodology is not necessarily indicative of future results.
CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN
LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT
REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE
RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN
MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN
GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF
HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY
TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All Materials presented are for training purposes only . Traders should paper trade any new method
prior to risk of personal capital.
All Materials Copyrighted ATTS 2007-2015
Disclaimer
Copywrite ATTS 2007-2015 2
Big Part of Convergence of Clues?
• Establishing the Convergence of Multiple Clues provides objective measurements for trades with improved probabilities
• Provides greater understanding of expectations
• Helps Minimize Risk & Maximize Profit
Today’s Objective: Provide a simple means of grading potential set ups before pulling the trigger! Combining the clues of candlesticks, support/resistance, momentum and moving averages
Copywrite ATTS 2007-2015 3
Primary & Best Clues that Must Converge for a
Higher Probability Trade
Price Related Clues: Major Clues
Horizontal Support Zones
Horizontal Resistance Zones
Trend Lines
Flag Lines
Moving Averages for Trend
Moving Averages for Support
Moving Averages for Resistance
Candlesticks
Other Clues: Extremes on Indicators & Divergence
Copywrite ATTS 2007-2015 4
Looking for Clues & Connecting The Dots
Before taking a Bullish Reversal Signal during a Downtrend
o At least two or three clues must converge (be observable)
Before taking a Bearish Reversal Signal during a Uptrend
o At least two or three clues must converge (be observable)
During a Uptrend or Downtrend to trade in the direction of the Trend
o At least one additional clue must converge with the candlestick pattern
Copywrite ATTS 2007-2015 5
Candlestick History
Charting method originating In Japan between the 18th century & late 1800’s
Potentially used by Japanese Rice Traders
Introduced to Western Traders by Steve Nison in the 1990’s
Knowledge base and trading importance expanded by Steve Bigalow
Copywrite ATTS 2007-2015 6
Candlestick Basics
Candles and Technical Analysis go together
Powerful Tools – Only partially understood by most traders
Immediate feedback on investors sentiment
Greatly improve Reward/Risk on every trade in all time frames
Be a detective – Look for the Convergence of Clues
Presentation Material by: Active Trend Traders
Copywrite ATTS 2007-2015 7
Golden Rule of Candlesticks
Candlesticks and patterns require three criteria for
proper interpretation:
1. A Completed Line (Must wait for the time period to finish!)
2. Shape of the line or pattern
3. The Preceding Trend
Copywrite ATTS 2007-2015 8
What’s the Difference?
Bar Chart vs Candlesticks
Open
OpenClose
Close
Bullish Bearish
Low
High
Copywrite ATTS 2007-2015 9
Primary & Best Candlestick Signals
There are many, many Candlestick Patterns but these represent the Primary & Best
Indecisive
Doji's/Spinning Tops
Bullish Bearish
Hammer Hanging Man
Engulfing Patterns Engulfing Patterns
Piercing Line Dark Cloud
Harami Harami
Inverted Hammer Shooting Star
Morning Star Evening Star
Kicker Kicker
Copywrite ATTS 2007-2015 10
The Dynamic Doji—Watch for Small Bodies
- Doji’s and Spinning Tops show indecision between buyers & sellers—Neither side is in control!
- Clues: When present at past support/resistance or moving averages with indicator extended or divergent
- Price Action will tend to move in the direction of the open after a Doji/Spinning Top
Copywrite ATTS 2007-2015 11
Doji/Spinning Top Bullish
Series of Doji’s at Support
Clue: TSI Cross & Momentum Divergence
26%+ Move from Signal to High in one month
&
How Many Clues?
Would be comfortable trading this of support at $62?
Copywrite ATTS 2007-2015 12
Be a Detective: Search for Clues
12
3
How Many Clues?1. Series of Doji’s2. Strong Support?3. Crossing & Divergent
Indicators
4. Break Above 8 day EMA
Copywrite ATTS 2007-2015 13
Conclusion of Part 1
Copywrite ATTS 2007-2015 14
Top Related