Candlestick Patterns For Stock Trading | Travis Rose | Skillshare

Candlestick Patterns For Stock Trading

Travis Rose, Financial Analyst & Trader

Candlestick Patterns For Stock Trading

Travis Rose, Financial Analyst & Trader

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16 Lessons (1h 31m)
    • 1. Class Preview

      2:36
    • 2. Introduction

      1:33
    • 3. What Are Candlestick Charts?

      5:21
    • 4. The Anatomy of Candlesticks

      3:36
    • 5. Supply & Demand

      8:46
    • 6. Support & Resistance

      11:52
    • 7. Standard Doji

      4:49
    • 8. Dragonfly Doji

      3:20
    • 9. Gravestone Doji

      5:56
    • 10. Engulfing Candles

      7:55
    • 11. Morning & Evening Stars

      8:33
    • 12. Hammer & Hanging Man

      6:54
    • 13. Mat Hold Pattern

      5:29
    • 14. 3 Methods Pattern

      5:39
    • 15. Gaps Between Candlesticks

      3:22
    • 16. Gap Close Reversal Strategy

      5:00
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About This Class

Candlestick Patterns For Stock Trading access also includes a free stock trading ebook download with bonus in-depth trading strategies, tips, and education! 

This class is designed for new traders and investors to learn step-by-step how to properly analyze candlestick charts. Throughout the course I'll be teaching technical analysis essentials and some of the most valuable candlestick patterns that will prepare you to take on any market successfully! Whether you're trading stocks, forex, or futures, these same candlestick patterns can be used to improve your technical analysis skills!

You'll be learning from a self-taught, full-time trader and investor on a mission to help other traders avoid the same mistakes that he made early on in his career. The strategies and techniques that I teach within this course are the same ones I use on a daily basis in my own trading, and have allowed me to focus on the market full-time!

If you're someone interested in learning how to do technical analysis like a pro with the use of candlestick patterns and candlestick trading strategies... this class is exactly where you should start!

Some What You'll Learn:

  • What are candlestick charts?

  • The anatomy of candlestick charts (how they're formed)

  • The importance of supply & demand

  • Doji candlesticks

  • Continuation candlestick patterns

  • Reversal candlestick patterns

  • Gaps in candlesticks

  • Gap close reversal strategy

  • Gap & go trading strategy

  • How to practice trading risk-free

  • See live examples & analysis

  • MUCH more!

Meet Your Teacher

Teacher Profile Image

Travis Rose

Financial Analyst & Trader

Teacher

ABOUT ME

 

Hello! My name is Travis and I'm a full-time day trader and investor in the stock market. When I first started investing, I learned everything "the hard way," which lead to me taking a lot of unnecessary losses. Fortunately, through years of trial and error I figured out how to profitably navigate the market. 

I've decided to put together all of the lessons I've learned over the years into my courses/classes to help new traders and investors avoid the same mistakes that I had previously made. I've now helped over 10,000 students worldwide across a variety of e-learning platforms and am happy to have been able to help so many get started on... See full profile

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Transcripts

1. Class Preview: Hello, and thank you for checking out their scores. My name is Travis Rosen with full-time day trader and investor in the stock market. And I'm going to be your instructor today for this candlestick trading in analysis masterclass. Now, before getting started with the course itself, I wanted to give a quick overview of what you're going to learn throughout this course and discuss some of the topics that I'm going to be teaching you. So that way you can make sure that this is the right course for you before you get started. And with that being said, we're going to start from the basics of candle sticks and gradually get more advanced throughout the course. So that way if you are brand new to the market and you don't have a ton of experience with technical analysis, you're not going to feel loss later in the course once we start talking about some more advanced candlestick patterns and more advanced candlestick trading strategies. With that being said, we're going to start off with the topic of what our candlestick charts. And in this section we're just going to be comparing candlestick charts to other chart styles and going over some of the benefits of using candlestick charts. After that, we're going to move on to the anatomy of candle sticks. And in this section I'm going to break down what exactly makes up these candle sticks in the first place, which is going to be very helpful later on in the course. Once we start talking about some candlestick patterns. From there, we're going to move onto supply and demand. And I'll teach you exactly how this ties into candle sticks and how candle sticks can actually help us visualize where there are strong levels of supply and demand, which is a huge factor in trading and investing in the market. And you can actually allow you to get on the right side of the tree. Then we're going to go over in detail what exactly support and resistance levels are. We're going to talk about gaps and candlestick charts. And I'm even going to give you a gap trading strategy with proven success. From there we're going to talk about what are known as DOJ, candle sticks and dodgy patterns, which can be a very valuable tool for anybody doing technical analysis. Afterwards, we're going to be going over a variety of different continuation candlestick patterns, which can help you trade the trend of the stock and ride the momentum, whether it be to the upside or the downside for a profitable trade. And last but not least, before finishing off the course with more examples and analysis, we're going to go over some reversal candlestick patterns, which can help you predict the talk in the bottom of a move, which when used properly is going to allow you to sell at the top of a move and bio at the bottom of a MOOC. So if you are looking to greatly improve your technical analysis skills and your ability to read price action with candlestick patterns and analysis is course is the perfect place to start. So with that being said, let's go ahead and get started right now with lesson number one. And talk about what exactly candlestick charts are. Enjoyed the course and feel free to use the Q and a section of the course if you do have any questions along the way. 2. Introduction: Welcome to this candlestick trading and analysis masterclass. My name is Travis rows. I'm going to be your instructor today for this course. And before we dive into the main content of the course, I wanted to give a quick introduction to tell you a little bit about myself and what actually got me started here as an instructor. So with that being said, I am a full-time day trader and investor in the stock market and I have been for the past five or so years now. And I'm actually a self-taught trader, which means basically that I learned everything the hard way and the hardware being taking a lot of unnecessary losses that I could have very easily avoided at. I just followed in the footsteps of somebody that already knew what they were doing and somebody that was already profitable in the market. And that's actually what led me to start creating these courses here at Hope's that'll be able to help new traders avoid the same mistake that I made when I first got started. And that so many other new traders make when they first start as well. That's really why the information in my courses is designed to save you countless hours of studying and potentially thousands of dollars in losses that many new traders face due to lack of education. So with that being said, by the end of this course, you should be on a much better path to profitability and the market. Whether that be the stock market, the forex market, futures market, and so on and so forth. Because at the end of the day, candle sticks and technical analysis can be used in his very valuable information for any market when it comes to trading or investing. So anyway, without further ado with the intro now out of the way, let's go ahead and get into the main topic of the course and start talking about some candle sticks and candlestick charts. 3. What Are Candlestick Charts?: Alright, so to start off as corps, I wanted to really start with the basics out candle sticks and really the basics of technical analysis as well. Before we get into the more complex and more advanced candlestick patterns later on in the course. So that way if you're brand new to the market and you don't have a really good understanding of what candle sticks are. You're not going to feel loss later on when we do start to talk about these more advanced patterns and these more advanced trading strategies. So with that being said, what exactly even as it candlestick chart, candlestick charts essentially just tell us the price action summary over a set period of time. And that period of time can really be anything that you imagine. It can be something very short-term, like one minute. It can be five minutes, ten minutes, 15 the minutes or it can be something longer term like one day, one week, or even one month. And because of that, because we can look at these candle sticks on any different timeframe, we can also use them for any type of trading as well. So if you're doing very short-term day trading and maybe you're in and out of positions within a few minutes or a few hours. Or maybe if you're swing trading and you're holding positions for a few days, a few weeks, or even a few months. Or even if you're doing long-term investing and you're holding positions for multiple years. Aimlessly charts can be used for those types of trading and can really help you take your technical analysis for those trading and investing types to the next level. Now with that being said, you are typically going to be using shorter timeframes if you're doing a shorter term type of trading. So for example, a one-minute candlestick chart would be much more useful for a day trader than somebody that is swing trading and holding positions for a little bit longer. So to kind of compare the different time frames, we have three different charts here, each taken on the same day and at the same time for the same stock. Over here on the left side, you see that we have the one day chart, which really just means that each of these candlestick represents one entire day of price action. Here in the middle we have the one-minute chart showing us canvas sticks representing one minute of price action. And over on the right we have the five-minute chart showing us candle sticks representing five-minutes a price action. Now we are going to break down exactly what makes up these Canvas takes. And you're going to understand exactly what it means when they look the way that they do. But I just wanted to kind of show you this side-by-side comparison of different timeframes on the same stock. So that way you can really see the difference between different timeframes, even when you're looking at the same day and at the same time. Now to kind of give you a comparison of a different type of chart style, there is also something known as the line charts, and this is one that many new traders are familiar with. But line charts unfortunately, are really only going to help you with the overall trend of the price action and are not going to give you quite as much information as candlestick charts do. Now just to give you how you can actually switch from one chart style to another. We're over here in the thinkorswim platform now. And if you happen to be on candlestick charts by default, and for some reason you wanted to switch over to a line chart. The way that you would do that is by going to chart style at the top, clicking on that, going to chart type, and then selecting line. And if you happen to be online by default, you would do the same thing by clicking on style at the top, then selecting chart type followed by candle. Now also, because I know a lot of new traders in a lot of traders that watch my courses happen to be using the Robin Hood platform on their phone. I also wanted to show you how you can switch from a line chart to a candlestick chart and vice versa on the Robin Hood app. And the way that you do that is by simply clicking on this little icon to the right of the timeframe of your chart. And that's going to by default switch you over to a candlestick chart. And the way that you go back to your line charts then is by once again clicking on the same icon. So as you can see, it is very simple to switch from different chart styles. And unfortunately, many new traders that are using Robinhood don't even know that they can actually switch over to a candlestick chart. And because of that, they're leaving a lot of information behind. And in a way you're kind of setting yourself up for failure by trying to take on the market with such limited information. And with that being said, I want to now go over just a few of the candlestick chart benefits that you may be missing out on by using something like a line chart in the first place. And the first of those is of course, like I've already mentioned, that these candlestick charts are going to give us a lot more information about the overall price action over any set period of time. And again, once I start breaking down the canvas stakes for you and explaining what actually makes these up. You're going to understand a bit more about what information is being provided by the candle sticks. But regardless, any information being provided by the charts is going to help you get an edge over your competition anyway. The second big benefit to using a candlestick chart is that they really help you to see a chart patterns, chart formations more clearly. Last but not least, they really help us to also see where there are major levels of supply and demand. Supply and demand actually plays a huge role in the stock market and is actually pretty much the sole reason for prices going either up or down. So having an understanding where there are major levels of supply and demand can be a huge edge in the market and can really help you to get on the right side of a trait. 4. The Anatomy of Candlesticks: Now to move on from the candlestick charts and onto the candle sticks themselves. I want to explain a little bit about what actually makes up these candle sticks. And kind of start to explain why they look the way that they do. And really even though candles six May and a little bit complex, they're actually pretty simple and they're made up of four simple points. Those points are the Open, the high to low, and the close. Now again, because we can look at candle sticks on any different timeframe. The opened the high, the low, and the clothes that make up the candle sticks are going to be different depending on the timeframe that you're looking at. And these four points actually tell us exactly what the candlestick itself is going to look like. So if we take this green candlestick over here on the left, for example, you can see that the open price of this canto steak is down here at the bottom of the crane box. The close price is then going to be at the top of this green box. The highest, then going to be the line that sticks up from the top. And the low is going to be the line that sticks out from the bottom. Now this line is sticking up from the bottom, is actually known as the lower wick. And it's pretty easy to remember because of the fact that these are called candle sticks and candles six to of course have Wix. Then the line that sticks out from the top, again representing the high, is going to be known as the upper wick. And the colored main section of the candlestick itself is what is known as the real body. And of course, the real body is going to be green when the open price is lower than the close price, meaning that the price, the stock went up within that period of time. On the other side of the spectrum, we know that a red candle stick is one that closed at a lower price than it opened. And is still made up of the three main sections, the upper wick, the real body, and the lower wick. If we go over to the thinkorswim platform once again here, the market happened to be open right now. So this is actually real-time price action. And what we see is the stock, AMD moving in real time. Right here in the middle we have the one-minute chart. In over here on the right, we have the five-minute chart. So what we can do is just watch this in real time to see how the price fluctuates and see these cantos actually open, move up to their HIV, moves through low and then close to actually form these candles. So right now what we have is a candlestick that is about 30 seconds into its one-minute period before it closes. So that means that in 30 seconds or so we're going to have a new candlestick open. And now that that one closed, we can hover above that candlestick. And actually if you look at the top of this chart here, you're going to see an O and H and L and a C, which represents the open high, low in the close. So the open for this candlestick over this one minute time period was $81.67 cents. The high was $0.03 higher at $81.70. Below is down here at $81.57 cents. And then this dog clothes, $1.62, which is of course below the price that it opened. And explains to us why this candle stake has actually read. And you can see, of course, after that one closed immediately, a new one opened. And the open price on this one was $81.65. And because this one is green, we know of course that it closed at a higher price than it open. And you can see up here next to the see that it did close to sense of bug word open at $81.67 cents. 5. Supply & Demand: Ok. And now to move on to a really important subject when it comes to trading and investing in the market. And this subject Ising greatly with candle sticks in different candlestick patterns. And that is what is known as supply and demand. Now, like I've already mentioned, Spiderman is actually the sole reason for price fluctuations in the market. And they may come to a surprise to many people because many new traders seemed to think that something like a press release or news being released by the company, or earnings reports, or even social media influence is the real reason that stocks go up or down. But at the end of the day, what actually happens is those things like the news and the press releases actually affect the current supply and demand for the stock. But then the supply and demand is actually going to be the main reason that the price goes either up or the price goes down. So for example, if a company puts out an earnings report and on that earnings report you see a lot of positive growth telling you that the company is getting stronger financially. Generally that's going to be good news for the stock as well. But that news is actually not going to cause the stock to directly go up. What happens then is people see this news and that's going to cause a larger demand for the stock, which is then going to push the price of the stock higher. And really the same concept is true for many things in the economy as well. If you think, for example, about something that is limited edition, many times limited edition items, much higher than they would be if there happened to be a larger supply of them. And the reason that they can be priced so high is because there is a very small amount of them available to people like you and I to actually buy. And there's also usually a very strong demand, many people wanting to buy these items. And that's strong demand and low supply is then what causes them to be price so hot. And the same concept is true for the stock market. If at any given price there happens to be stronger demand or stronger buying than there is selling or supply. That's going to cause the price to rise from that area. On the other side of the spectrum, if there happens to be stronger supply or selling than there is demand or buying, that's going to cause the price to stock to fall. So really what candle 62 in the market and while we're doing our technical analysis, is help us to visualize the current levels of supply and demand. If you think about it, we of course know that green candle sticks represent channels, steaks that are closing higher than they opened, telling us that the stock price went higher during that period of time. That of course, tells us that there has been a strong demand at that price level, which is what push the price of the stock higher. On the other side of the spectrum, red candle stakes can tell us that there has been strong supply and that's what caused the price of the stock to close lower within the set period of time. But to take things just a step further, you can actually look specifically at the wicks, whether it be the upper wick or the lower wick of the candle to see where there's kind of been a shift in the supply and demand. And this can be very helpful for actually looking for a reversal points in the market. And when you do it properly, you can actually allow you to buy into the bottom of a move and cell into the top of a MOOC. So if we take this example here on the left side, we have a diagram showing initially a strong move up in the price. And many times what we see happen at a reversal point is there's going to be a lot of long upper wigs on the candle, telling us that the supply has taken over and that there is now more selling or supply at that price than there is demand or buying. And if you think about it, what these long upper wigs on the candles actually tell us is that within this period of time, the stock. By all the way up. But at some point the sellers or the supplied took over and push the stock price down before it closed. So many times these long upper wigs on a candlestick can represent a bearish reversal to the downside. And if you're in a long position, that can be a red flag and can be a great indication that you should sell and logging your profits before the stock reverses the downside. Otherwise, you can actually look at these as an opportunity to short sell, to profit from that downside reversal. And basically, if you don't necessarily know about short selling, what it does is allows you to borrow shares from your broker to sell at a higher price before you think the stock is going to come down. And then later on what you do is buy back those shares and they automatically get returned to your broker. And ideally you still want to buy low and sell high. But in this case with short selling, you're simply going to sell high first and then buyback later and profit the difference between where you bought and sold. So these long upper wigs telling us that sellers are starting to take control of the stock can many times be a great indicator to actually open a short position. On the other side of the spectrum. If we have a stock that is initially down trending and making new lows. And then we start to see a lot of long lower Wix on the candle sticks. That tells us there is now a shift from strong supply to strong demand at this price level. And many times that's going to cause a bullish reversal to the upside, which we can buy into and profit from the stock bouncing and reversing to the upside front. And if we go ahead then and take this example that we have here with Tesla stock. You can see that pretty much everything we talked about in the past slides is really coming to life here with this example. And Tesla, initially we're seeing strong signs of supply, which is represented by multiple red candle sticks telling us that this talk is getting pushed lower and lower due to strong or supply than demand at these. And then what we see eventually happened at the bottom of this move. And at the bottom of this short-term downtrend is that there's going to be multiple long lower wigs on these candles starting to form, telling us that the demand is starting to overtake the supply in the market. And down here at these prices, there's going to be a lot of demand for the stock, which is eventually going to push the price higher. So because we are looking at a five-minute chart, this is what you would see if you were doing some day trading probably. And being able to actually spot these long lower wigs in real time while you're doing your analysis in the market could be a great opportunity for you to buy into the bottom of this move before Teslas starts to bounce back up. And it can be a very easy and profitable day trade by looking at that opportunity. If we take the next example that we have here with AMD, we see pretty much the exact same thing happened in this case. We're looking at the one-minute chart. So it's really an even shorter term timeframe. Once again, which is what you would be using probably for day trading or any very short-term type of trading. But again, this is showing us that there's a strong supply in the market getting pushed lower and lower with strong volume as it's making new lows. And then what we see up and down here at the Lowes is that there's all these long lower wig starting to form on these candle sticks telling us that the demand is starting to again overtake this fly. And that would be a really good bye opportunity in this case because we see this doc bounds from about $88.50 down here at the low, all the way up to later on in the day getting up to well over $91 per share. So those are two very good examples of how you can actually look at these lung lower wigs on candle sticks to kind of help you determine when a downtrend is starting to come to an end. On the other side of the spectrum, like I've already mentioned in the previous slides. This can of course be represented also by long ago wigs forming on canvas six, telling us that an up trend or a strong move up is starting to come to an end. And you can see here with the example we have in PSP on multiple different occasions as the stock spikes up into this 145 area, you can see that there are long upper wakes on all these candle sticks telling us that there is a ton of supply at this price level. And not only is it really just a flat line of resistance, but also the fact that there are all these long upper weeks on the candle sticks at their resistance level is going to be just another reason to sell out of your position. If you were currently in one and actually look to take the other side of the trade by short-selling into that resistance level to profit from the stock reversing back down to the downside. And I really wanted to show this example with you because it's very important to try to pair as many things as possible together when you're looking for the best type of trade set-ups. So in this case, not only do we have again, a flat line of resistance where the stock spikes up into multiple times and fails to break above. But you can also pair that with the fact that there are her wigs on the candle sticks telling us that there is a lot of supply being sold up at that price level. And this would really be the same concept if you saw a lot of long lower waves forming on candle sticks. While the stock is at a level of support. By pairing multiple indicators together and only taking the trades that have many different things telling you a stock is likely to go in one direction next. That's going to help you improve your accuracy in the market. And that's going to really allow you to take the quality over quantity approach to your trading. Which in the long run is of course going to lead to the most consistent trading, inconsistent profitability as well. 6. Support & Resistance: All right, now moving on to support and resistance. Now I know I've already talked briefly about support and resistance in the past section when we talked about supply and demand. But I want to go over these topics in more detail because they tie and really greatly with candle sticks for a few reasons that we're gonna go over in the future of this section. But just kinda give you an idea of what I mean by that. In 06 can really help you again take the quality over quantity approach to your trading. And they're going to help you buy into breakouts in the stock market that are going to have the highest probability of those breakouts continuing to the upside. And hopefully they're also going to help you avoid buying into breakouts that tend to reverse straight back to the downside and ultimately end up causing a loss. So before we get into exactly how that works, it's important to know the basics about support and resistance. And for those of you that may not know support a is going to be a price level where a stock historically has a difficult time breaking below, again, this is going to be because of stronger demand or buying. Then the rays selling or supply at that level. And the support levels can be a really good opportunity for us to kinda binds to stock at the low before it bounces to the upside and continues upward. And this is going to be especially true when you pair a level of support with a bullish candlestick pattern. And we're going to be going over both bullish and bearish candlestick patterns in the future of this course. But for now, before we get into those, it's important again to you just understand that basic of what exactly support is in the first place. And if we go ahead and take this example here, we have a diagram showing us that a stock is initially moving up and then it starts to pull back and it bounces off this same level on multiple different occasions. And that's telling us that there is of course a lot of demand at that price level. So every time it pulls down to that price, the demand is pushing it straight back up. And essentially that's what a level of support is going to be. And that's essentially what it's also going to look like on your chart. Now it doesn't always have to be a perfectly flat horizontal line of support can also be slanted a little bit, and that's going to be what is known as a trend line. But in this case our support level is perfectly horizontal. So we would look to buy into that support line just above this port level. And then hopefully like we have in this example, the demand is going to push the price up. And we can later on cell at a higher price and profit the difference. And just to show you what this looks like on a real chart, we're looking at the one-minute charts. So this would be what you would be looking at as a day trader. You can see that there is a very clear line of support down here at about $2.50. And just about every time it pulls down there at bounces straight back up and it actually consolidates above the support line for multiple hours throughout the morning on this day. So throughout those couple of hours while it's holding that support line, you would have plenty of different opportunities to actually buy into this fourth level and then profit from the run that actually happens later on throughout the day. And now to kind of flipped onto the other side of the spectrum, resistance is going to be essentially the exact opposite of what support is. And because of that, it's going to be a price level where a stock historically has a difficult time breaking above due to stronger selling more supply than demand or buying. And resistance levels can actually be a great opportunity to sell at the highs before the stock reverses the downside. So if you happen to be in a position and you're looking for a level to actually sell and lock in your profits. Nearby level of resistance is always a good area to kind of set your profit target for that trait. Alternatively, if you don't have a position open. You can also use a level of resistance to look to short sell, to profit from that bearish reversal. And again, we want a pair as many things together as possible to give us the highest probability of success with our trading. So the same way that we would look for a bullish candlestick pattern when we're looking to buy the level of support. We also want to look for it bearish candlestick pattern at a level of resistance. Which is then really go into confirm that level of resistance and is going to kind of lock in the fact that we should be selling out of our positions. And possible looking to take the other side of the trade by opening up a short position. And this is of course what we see when we look at a level of resistance. It's going to again, basically look like a flat horizontal line of resistance. But it can also be kind of slanted to the downside if it happened to be trendline resistance as well. And again, because stocks tend to have a difficult time breaking above a level of resistance, we can use them to look to short sell and then profit from that reversal down to the downside. And for a quick example here we have the stock symbol AMD. And we can see that there is a very clear level of resistance up here at about $92.35, the stock spikes into that price level multiple times throughout the morning on this day. And every time it gets to that price, it seems to pull straight back down. So obviously there's a ton of supply and a lot of selling going on at that price. So it's having a very difficult time breaking through. And if you were watching this in real time, that this dog was really struggling to break above $92.35. You could then look to you open a short position up here in the $92.30 area. After that, resistance has already started to form early on throughout the morning. And then you could actually profit from this bearish move that we see happen later on throughout the day. And you can start to cover into these lows down here. Again, profiting the difference between where you bought and sold. But just with short selling, you're going to be selling high first and then buying low later on. And for one more quick example, we have J and seee here. And this is actually a very important example because what we're gonna talk about next in this section is confirmed breakouts and also false breakouts. And what we see happen here is that the stock has a little bit of resistance up here and the $8.50 area. And you can see that very briefly that stock actually broke above that resistance level. And it got up to a high of about $8.60 before immediately coming straight back down. And then just about half an hour later, it's all the way down to a low of about $6.70. So that was a huge sell-off from that line of resistance. And that's the exact type of setup that you want to avoid buying into. And you want to wait for that breakout above that resistance line to actually be confirmed. And that's actually what I want to talk about right now when it comes to breakouts above resistance and breakdowns below support. So first and foremost, what a breakout even is is going to be a move above a defined level of resistance. And a breakdown is simply going to be pretty much the opposite, being a move below a defined level of support. Now one very common way that traders like to take advantage of the momentum and the market is by looking to buy the break out of a stock and buying the breakout is actually a great way to trade momentum. But unfortunately, many new traders are taught to buy breakouts improperly and that's going to cause them to buy into the stock at the high of the MOOC. And the way that they're taught is if we go back to the previous example, because we have a defined level of resistance up here at about $8.50. Many people are caught by the highs. It starts to break over that $8.50 area. So because of that, they would be taught to buyin right up here at about $8.50, all the way up to $8.60. And that's going to cause them to buy the exact height of the move before this very strong moves to the downside. And obviously that's something that we want to avoid doing as traders. And by following the things that we talked about in the rest of this section, when it comes to looking at the candle sticks and waiting for a confirmation, you're going to be able to save the trade, the breakout of a stock, and avoid buying into these breakouts that comes straight back down. So just kind of visualize what these breakouts and breakdowns are going to look like. You can see that of course with a breakout, we're going to have a defined level. And it's going to eventually break out above that resistance and continue up to the upside. And the same is going to be true for our breakdown. In this case though it's going to break below that level of support and then continue to the downside. Now unfortunately, nothing in the market is going to work 100% of the time. So even though stock may break out above a level of resistance, that doesn't necessarily mean that it can't end up being what is known as a false breakout. And false breakout is simply a short-term temporary breakout above resistance or short-term temporary break down below support before the stock reverses to the opposite side. And that's exactly what we saw back here when we see a brief breakout above that resistance line. And again, because many new traders are taught to trade breakouts the improper way without a confirmation. That's going to cause many traders to buy into these highs and they're going to end up taking a big loss on this trade if they sell down here as the stock starts to sell off. So if we move on to this next example here with Tesla, This is a really good example because we can see not only that there is eventually a confirmed breakout in the stock, but we also see a few short term temporary false breakouts that happen above this level of resistance. So this resistance line is right at about $410. And you can see that a few times throughout the morning the stock spikes price level and then come straight back down. So naturally that's going to be a level of resistance. And later on throughout the day, you can see that there was a few times where it briefly broke above that resistance, but it's not able to actually hold above that resistance line and continue to the upside. And what happens is it consolidates in that area for a while before it ends up actually confirming a breakout to the upside and then running up to new highs later in the day. So even though in this case, buying into these false breakouts right here and right here would eventually work out because of the Confirm breakout that we have right here. That's not always going to be the case. And many times what you're going to see happen is that he's going to look exactly like this example. And the stock is going to briefly break out above that resistance and then have a big cell off to the downside. So the best way to trade breakouts is to look for a candlestick confirmation. Waiting for a confirmation of a candlestick to close above that level of resistance on a breakout is going to help you avoid buying into these false breakouts. And again, that is eventually what happens with this example on testlet stock. We see a few quick falls, breakouts and then this candlestick right here with the stock actually closes above that resistance level is when this breakout is actually confirmed. And that's going to really be your buy signal if you're somebody that's looking to trade the momentum of the stock. And you can also see that that is exactly when the moment to really starts to pick up. And that's when it starts to have the next strong move to the upside. Now if we compare that to the example that we have here with MRS. n. In this case, we're looking at the one day chart. So if you were somebody looking to trade longer-term or maybe hold positions for a few weeks all the way up to a few months, you would most likely be focusing on the daily chart. And just like you would if you were day trading or doing any kind of short-term trading, you would still want to wait for that confirmation above that line of resistance if you were trying to trade the momentum of the Salk and bind to the breakout. So in this case, on this day we have the stock breakout above this line of resistance. But before the close its cells off pretty strong, it actually closes significantly below that line at resistance. So in other words, it ends up being a false Breakout, which is of course something that we want to avoid buying. And you would be able to do that by waiting for the confirmation and waiting for a day that the stock actually is able to close above this line of resistance. So hopefully this section talking about support and resistance, as well as false breakouts and confirmed breakouts kind of helps you to see how candlestick sky and Wikis different things. At the end of the day when it comes to technical analysis, canvas six are always going to tie in because they really are the foundation of doing technical analysis in looking at different charts and chart patterns. But if nothing else, after watching this section, I hope you're a little bit more picky with trading breakouts in the market and waiting for a candlestick confirmation. 7. Standard Doji: All right, so at this point in the course, I want you start getting into some actual candlestick patterns. Now that we know a lot of the basics about candles steaks, we know what creates them. We know how they differ from line charts. We know how they can actually help us look into the supply and the demand in the market. And after the following sections, once we talk about some of these candlestick patterns, you're also going to be able to know exactly how you can use these candle sticks to determine where the stock is most likely going to move in the future. And the first of these candlestick patterns that I want to start getting into, or what are known as DOJ candle six. So with DOJ, and it's simply a candlestick with virtually the same open and close price. Now because we've already gone over why canvas six look the way that they do. You know that? Because the difference between where the candlestick opens and where it closes is going to create the real body of the candlestick. And that is of course, the colored rectangular section of the candlestick. That means because it doe t is virtually going to have the same open and closed price. It's not really going to have much of a real body if at all. And thinking back to what we talked about in the supply and demand section of this course. We know that long upper wigs and long lower Whigs can often be an indication that the stock is starting to reverse. So even though there's no real body in these Dojo candle sticks, there is still going to be upper wigs and they're still going to be lower WIX. And basically what these candles six represent to us is that there's a lot of indecision in the market. And many times that indecision is going to be at the end of one trend and at the beginning of a new trend, which makes them great for spotting reversals in the market. So just to give you an idea of what some of these dodgy candles six, are going to look like. There's many different types of DOJ candle sticks, but we're going to focus on three main ones here in this course. We're gonna talk about first the standard dodgy, followed by the gravestone DO G and then the Dragon Flag dodgy. In at the end of the day, all of these DOJ cantos stakes are going to be a great indication that there is a reversal coming in the market. But because they have slight variations, they are going to look a little bit different from one another. And they can be used in slightly different ways as well. So that's why we're going to kind of break down what each of these means and how we can actually use each of these four are on trading. So to start off, I want to start with the basic standard DOJ. Standard O G is going to be a DOJ candlestick with a real body that is ads or right next to the middle of the candle. So this first candlestick that we have here is going to be a good representation of what a standard dose is typically going to look like. You can see that there is, of course not much of a real body because the open and closed price, or just about the same price. However, it is going to be right into the middle of the candlestick. Still of course, having an upper wick and still having a lower wick as well. Candlestick forming that can either be an indication of a bullish or bearish reversal in the market. And to give just a few examples of what this is going to look like. For the first example we have on the left side of the chart. Initially the stock is starting up in an up trend. Obviously the demand is taking over the supply in this case, and the buyers are pushing the price to stock higher. However, up at the top of the move, you can see that we have a perfect standard DOJ candlestick. And right after that Candlestick is formed, the price reverses to the downside. So because the trend is initially bullish and we see a DOJ candlestick pattern that's going to indicate to us a bearish reversal. Again, being to the downside. And on the other side of the spectrum. And also see this indicating a bullish reversal in the market as well. And I wanted to include this example because you can see that this DOJ candlestick happens to have a tiny bit of a real body when compared to the one that we have over here with VX RT. And it's important to keep in mind that the real body of a DOJ candlestick is not always going to be a perfectly flat horizontal line, like we do have over here with VX RT. And sometimes there is going to be a tiny bit of a real body. But that doesn't mean that this isn't still a potential reversal point in the market because it is still telling us that there's a lot of indecision here at the bottom of this MOOC. And as you can see in this example, initially it starting off with a very bearish downtrend. The stock is making both lower highs as well as lower lows. Then we see that this bullish DOJ candlestick starts to form. And afterwards the stock balances backup and it's able to actually completely reverse a trend and start pushing back to the upside. So believe it or not, these very simple DOJ candle sticks can often be a great indicator when a stock is reversing to the opposite side. And in the following section we're gonna go over the next type of DOJ candlestick, which is known as the dragon fly dodgy. And it's also going to be a reversal indicator in the market. But this one is going to be typically use the same way that we see over here with our bullish reversal. In his most commonly just like this example, found at the bottom of a downtrend before the stock bounces or even completely reverses trends to the upside. 8. Dragonfly Doji: Alright, now moving on to the second of the three DOJ candle sticks that we're gonna be talking about in this course. And that's going to be the dragonfly dodgy. Now, like I've already mentioned, all DO G's are going to essentially be representative of a potential reversal in the market. But the three of them do have slight variations. And the dragonfly DO g, for example, is typically going to indicate to us that a bullish reversal to the upside is most likely coming in the market. And what the dragonfly DOJ looks like is actually going to be a real body, almost all the way up at the top of the candlestick. That means that almost the entire candlestick is going to be made up of a lower wick. And if you think back to what we talked about in the supply and demand discourse, we know that long lower Wix on the candles tells us that the demand is starting to take control of the supply. Meaning that the buyers are starting to take control of the sellers. And that's exactly what's causing the price of the stock to be pushed up immediately once it comes down, forming those long lower weights on these candle sticks. And really the exact same concept is true for a dragonfly dodgy because you can see this is essentially what a dragonfly DOJ is going to look like. You can see there is of course going to be a very small real body because it is a DOJ, a candlestick in the open and close price is going to be virtually the same still. But in this case, the real body is not going to be right in the middle like it was with a standard DOJ. But it's going to actually be all the way up to the top of the candlestick. And this diagram here is actually a great example of what we commonly see in the market. Initially starting off with a downtrend or strong MOOC down. And then we'll see the dragonfly dodgy form at the bottom of the move. Telling us again that down here at these prices, the demand took control. A Quigley pushed the price of the stock backup. And from there we see the stock balance and move higher. So when you see a dragonfly DO G starting to form many times, that can be again an indication of the bottom of a move. So we can look at these as a potential opportunity to buy into the stock to profit then from that bullish reversal. So what I have here on this slide is actually going to be an example of a dragonfly DOJ forming. And what I wanna do is actually go through these candles, click by click. And for you to actually practice spotting, DO geez, I want you to just look at the candle is look for the dragonfly dodgy, and then of course, see how the price reacts to it. And what you're going to see is of course, that it is going to start off with a pretty bearish moved to the downside. And then of course that's where we're gonna see our DOJ candlestick form. And the stock is going to reverse to the upside from there. And as you can see, this does of course look pretty much exactly like the example that we had in the diagram a few slides ago. Where we start initially off with the move to the downside or dragonfly dodgy forms telling us that demand is taking over the supply and then a bounce to the upside. And again, this is a very common occurrence in the market. So it is very important to keep an eye out for any kind of dodgy candlestick. Whether it be the standard dose, the dragonfly dodgy or the DOJ that we're going to be going over in the next section of this course, which is known as the gravestone DOJ. 9. Gravestone Doji: All right, so now that you know about the dragonfly dodgy, in this section, I wanted to kind of take the complete opposite side of the spectrum and talk about what is known as the gravestone DOJ. And essentially the gravestone DOJ is going to be the polar opposite of what the Dragon Flight dodgy is. And this is going to look like a DOJ with a real body at the bottom of the candle, typically indicating to us that there is a bearish reversal to the downside coming. And this is going to most often happen after a strong move up for event a complete up trend. So the same way that the dragonfly DOJ up almost entirely of a lower wick. The gravestone DO g is going to be made up almost entirely of an upper wick. And if you think about what we talked about again in the supply and demand section, you know that of course, along up a rig is assigned of supply starting to take control of the stock. Which can be a red flag for anybody holding the stock. And it can be a great sign that the stock is most likely going to pull back or reverse to the downside in the near future. And that's exactly what the gravestone DOJ is going to tell us. And again, this is going to typically start off with a strong move up or an up trend. Then we're going to see the gravestone dodgy form. And following that, we're going to see a reversal to the downside. So when you do see the gravestone DOJ form, somebody holding a position in the stock, they can be a great sign for you to lock in your profits and sell out of your position. And from there you can even consider taking the other side of the trade by actually short selling to them profit from that bearish reversal. And now I just want to give a few different examples here of the gravestone dodgy. And first, we take the example over here on the left. You can see we're looking at the stock PST V on the one-minute chart, and you can see that the stock is in a pretty strong out trend throughout the morning. In right here at about 1040 AM, we start to see a couple of really long upper wigs on these candle sticks, which of course would be your first big sign of a potential reversal coming in the market. And after that, we actually see a graves G form right here as the stock briefly breaks out above that previous high. And then it comes all the way back down and closes at the same price that it opened, Of course, then creating this gravestone dodgy. And from there we see a reversal all the way from that high up there, about 350, down to later on going below $3 per share. So obviously, if you were in a position, this is not a pull-back that you would want to hold through in by spotting that dodgy in real time, that would be a great sign for you to sell at a decision and lock in your profits without having to hold through this big pull back all the way from 350 to three. And pretty much the exact same thing happens over here with our example on DEFRA. We see another strong move up in the morning. And right here we get a nice gravestone DO G. In this case, the real body of the DOJ is all the way at the exact bottom of the candle. And you can see that just a few minutes later, the stock tried to retest that high that formed during that gravestone DO G, And it failed to break above it and then immediately reverse to the downside. Is one going all the way from a high of about $10.70 to later on being down at a low of about a $1.70. Again, another big pull-back that you would not want to hold through if you were somebody that was in a position in this stock. Alternatively, this would of course be another great opportunity to actually short-sell up into these highs, which would then allow you to buy back those shares later on, down at $8.76. So in this case there was actually about $2 of potential profit per share by looking to take as short trade into this gravestone Dojima. In real quickly in this section I want to just give another click by click in candle by candle screen recording of a grave sound DOJ. I think this is a great way to help you practice, spot them. So that way you're able to do so in real time once you start looking for them in your own trading. So what I'm going to do is just play this recording and I want you to keep an eye out for the gravestone DOJ, and of course, just see how the price of the stock reacts to it. Okay, so maybe in this example you notice that there's actually more than one gravestone Golgi that formed. You can see that we have the example here at about $77.20, the stock starts to bounce back up and then forms a gravestone dodgy, and continues right back to the downside. And this is a great example because it shows you that it doesn't always have to be a stock that's an up trend. And then forms a gravestone DOJ and then reverses to a downtrend. Gravestone can also form while the stock is already in a downtrend and the stock is trying to reverse and spike backup. But then when the gravestone dodgy forms, it's going to be an indication that the trend to the downside is going to continue. And that's exactly what happens in this case on both occasions. Also, when the second gravestone dodgy form down here at about $75.80. So again, regardless of your trading style and regardless of if you're somebody that buys and sells shares and profits from an upward move or through somebody that likes to take the other side of the trade by short-selling and profiting from these bearish moves. It's still very important to know about gravestone, DO Gs, and keep an eye out for them when you're giving your trading. Because whether it be locking in profits or looking for a great opportunity to short sell a stock. They can be very helpful and they can lead to some great traits. And with that being said, that's going to kind of finish off this section here with DOJ handle six. Those are the three main ones that I wanted to go over in this course. And in the next section we're going to be talking about other reversal candlestick patterns that are also going to be very beneficial for spotting the end of a trend and then looking for a reversal to the other side of the MOOC. 10. Engulfing Candles: The first of the reversal candlestick patterns that I wanna talk about in this section of the course are known as engulfing candles. And if you think about the wording golf, it of course means to completely cover or take over something else. And it really means the same thing when we talk about and golf and candles as well. So with that in mind and, and Goldman, candle is going to be a candlestick with a real body that completely covers or engulfs the real body of the previous candle. These candles CIGS are going to be great for spotting trend reversals, whether it be a short-term, a midterm or even long-term trend. So just like any of the other candlestick patterns and formations that we've talked about throughout the course. These can be on any different timeframe, whether it be at a one-minute chart, the five-minute chart, that daily chart, the weekly chart, or anything in between. So because of that, these can be used also for day trading, for swing trading or even long-term investing. Again, what is going to come down to is the timeframe of the chart. So if you're doing some short-term trading, most likely you're going to be looking at it in golf and Candle on a shorter term timeframe like the one minute or even five-minute chart. Whereas if you're doing some long-term investing, you would probably be looking for in a golfing candle on the daily or even the weekly chart. So anyway, with that being said, there are really two types of engulfing candles. There's going to be a bullish engulfing candle, and there's going to be a bearish and golfing candle. And hopefully by now at this point, and of course, because I've used the term bullish and barriers quite often, you know that bullish means to the upside and bearish means to the downside. So because of that, a bullish and golfing candle is going to be a candlestick that engulfs the entire real body of the previous candle and is going to indicate a bullish reversal to the upside. And most often this is going to happen at the bottom of a move and is going to cause a bullish reversal to the upside. And looking at the diagram at the bottom of the slide, you can see that this is pretty much what a bullish and Golfing is going to look like. We'll start off with a move down in a couple of strong red candles. And you can see that the bullish and Golfing is actually a candlestick pattern that's made up of not just one, but actually to candle sticks. And in this case, the second Canvas stake of the bullish and Golfing is going to again have a real body that completely engulfs the real body of the previous one. Once this real body is formed, and the second Canvas stick is actually close and we moved on to the next candlestick. That's when this is completely confirmed as a bullish and golfing. And that's when you would want to look to actually take the trade by buying into the stock to then profit from this bullish reversal. And if we go ahead and take this example here with spy, we're looking at the five-minute chart. So this would be ebullition golfing that happened intraday and would be a pretty good opportunity to buy into the stock for a short-term day trade. But as you can see, this dog has a pretty strong downtrend going on throughout the morning in this day. Then we see that there is a candlestick that completely engulfs the real body of the previous candles stake down here at the bottom of this trend. And also one thing to keep in mind, like I've already mentioned, you do want to try to pair as many things together as possible to give yourself the highest chances of success in the market. So with that being said, not only do we see a bullish and golf and Candle happen, but you can also see that there are multiple different candle sticks down here with very long lower Wix telling us that there is quite a bit of demand down here at that price level. So those two things paired together would be a great sign that this is the bottom of this move and it's going to temporarily bounce. If not completely reverse trends to the upside. And because of that, this would be a great opportunity to buy into the stock and then profit from this bullish reversal that happens after the bullish and golf and candlestick. And now as always, I want to go through a quick screen recording to actually go through this step-by-step, AN candle by candle, which I believe is going to be real helpful for you once you start trading in real time. Because this is much better practice than just looking at screenshots or just looking at diagrams because you can actually practice looking for these candle sticks in real time. And then of course afterwards seeing how the price of the stock reacts. So I'm going to go ahead and play this recording. And I want you to just keep an eye out for the bullish and golf and candlestick. So you can see at the bottom of this MOOC we get a nice bullish and golfing with the real body of this green candlestick, completely engulfing the real body of the previous read candlestick. And that's exactly where the price of the stock starts to reverse. And that's exactly where the stock starts to bounce from. So now that you know about bullish and golf and candles takes, i want to of course, take the other side of the spectrum as well to hopefully best prepare you for your live trading. And talk about what are known as Golfing candle sticks, which are essentially going to be the polar opposite of the bullish and golfing candle sticks. And with that being said, these are going to form typically at the top of a move or at the top of an up trend. And they're going to cause a reversal to the downside. Because that they can be used to sell out of a position or even loved to short sell the stock to them, profit from that bearish reversal. And again, like any of these patterns, they can form on any different timeframe and can be used for any different trading style. So over here on the left side, you can see we have an example of a bearish and golfing. On the one-minute chart, we see a strong move up in the stock happening in just a one-minute timeframe. And then after that, pretty much immediately we start to see that there is golfing. And the real body of this red candlestick completely engulfs the real body of the previous green candlestick. And from there the stock reverses all the way from a high of about $10.35 down to a low shortly later to below $9.85. So by being able to spot this bearish and golfing candlestick and real time, you'd be able to sell out of your position way up here and avoid having to hold through this pretty strong pullback. Also, you can take the other side of the trade by short selling and then profiting from this pullback as well. In alternatively, if we take things a little bit longer term and we look at AMD over here on the daily chart. In this case, you can see that the real body of this red candlestick engulfs the real body of the previous green candlestick on the daily chart, which would be an indication that the stock is going to reverse to the downside over the next days and weeks. And that's exactly what happens in this case. On the day of the bearish engulfing, it hits high of $94.28. And you can see that just a few weeks later it gets all the way down to about $74 per share. Or in other words, it pulled back about $20 per share in a pretty short period of time, which is definitely something that you would want to avoid holding through if you were somebody that was trading AMD stock. Again for some further practice, I'm going to play this green recording. And I want you to just keep an eye out for the bearish and golfing. So in this example, you can see that a pretty strong move up happened early on in mourning for this day. And right here with these two candles, we actually get our bearish and golfing. The real body of this red candlestick completely engulfs the real body of the previous green candlestick. And that's exactly where the sock reverses to the downside and actually comes all the way back down to where it started from in the first place. And that just goes to show you how valuable knowing these candlestick patterns can be. Whether your long trader or a short trader. Very simple patterns can actually help you predict these moves and predict these reversals in the market. And with that being said, let's go ahead now and move on to the next type of reversal candlestick, which is called the Morning Star. 11. Morning & Evening Stars: Alright, so continuing on with the reversal patterns in the market. In this section, I want to go over what are known as the Morning Star and the Evening Star patterns, which are just like the engulfing patterns that we went over previously in the course are also going to be reversal indicators in the market. Now to start off, I want to talk about the Morningstar pattern. This is going to be a bullish reversal pattern. So for that reason alone, it's going to be very similar to the Polish engulfing pattern that we previously went over. And because of that, this is going to be an opportunity to buy into his talk at the bottom of a move to then profit from the start reversing to the upside. Now one of the main ways that this is visually going to be different from the bullish and golfing pattern, is that this is actually going to be a candlestick that's made up of three candles. And if we go ahead and take a look at this diagram here, this is typically what the Morningstar pattern is going to look like. We're going to start off with a strong moved to the downside with one big red candle. Following that, we're going to see one much smaller candles steak, with a real body that is again much smaller than the previous candle, as well as the following candle. And not following candle is then going to be a green candlestick to the upside, which then closes right around the price of where the first candle steak actually opened. And once that canvas tag actually closes near that price, that's going to be a confirmation of this pattern forming. And afterwards that's actually going to be where you would want to look to buy the stock to then profit from the bullish reversal. Now the way that I like to explain this pattern is if we were to be looking right now at the one-minute chart. So each of these candles was representing one minute of price action. And we were to switch over then to the three minute chart. All three of these candles would then be combined together into one single candle. And I want you to then try to envision what that one single candle is going to look like. Hopefully you came up something along the lines of what we have over here on the right side of the screen. And the reason that one single candlestick would look something along the lines of what we have here is because if we would take our first candlestick, we see that the opening prices right here, it's going to spike a little bit up to this high before coming back down. During the second Canvas dig, it would hit a low down here before bouncing back up in the third candlestick and closing slightly below the opening price of the first candlestick. And that's exactly what would make it look the way that it does. And if you've watched the entire course up until this point, hopefully by now you know that this long lower wick that is on this candlestick is going to be a great and very common indicator of a bullish reversal in the market. And the reason for that is of course, because we know at some point within this candlestick, the sellers drove the price. This talked down to this flow. But eventually the buyers started to take control of the market. And all of that demand push the price of the stock right back up to just below where it opened. Which is a sign that there has been a shift in the supply and demand in the market and that there is likely a bullish reversal coming. And that's exactly what this Morningstar pattern represents to us. And that's why it can be such a great pattern to look, to bind to the market, to profit from that bullish reversal. Okay, now to just go through this step-by-step in kindled by candle. I want you to just keep an eye out for this Morningstar pattern. And of course, See how the price of the stock reacts to it. Okay, so you can see at the bottom of the chart, we actually have our Morningstar pattern. We have initially are big red candle, followed by a much smaller candle in the middle. And then a green candlestick that actually in this case goes well above the high of the opening candle. And from there the price of the stock rebounds and continues higher. And I wanted to include this example in this section because it doesn't always have to be as simple as a downtrend, followed by a morning stark pattern, followed by an up trend. In many cases, this can actually be a pattern that forms while the stock is actually in an up trend, but is pulling back or having a dip along the way. And by spawning this pattern in real time, while the stock is pulling back, it's going to allow you to safely buy into the pullback of the stock to then profit from it bouncing backup and continuing on with its up trend later on. And really that's exactly what we see in this example. You can see that the stock is in an up trend making both higher highs as well as higher lows. However, of course along the way, even though it is up training, it's going to have pullbacks and it's going to have dibs. And those are going to be great opportunities for you to actually buy into the stock without chasing all the way up at the highs. And by looking for this morning star pattern, you would be able to do exactly that. So now on the other side of the spectrum, the Evening Star is essentially going to be the exact opposite of what the Morning Star is. Of course, this is still going to be a reversal pattern in the market. The only difference is that this is going to be irreversible pattern to the downside, whereas the Morning Star is a reversal pattern to the upside. So with that being said, we're going to use the Evening Star more for selling or short-selling than we would for by or covering a short position. And again, this is also going to be a three candle pattern, most commonly in this case found at the top of move, indicating to us a bearish reversal to the downside. And this can offer us a great opportunity to short sell, to actually profit from that bearish reversal. So that way we can later on cover our short position at a lower price. So when it comes to the way it looks, it's pretty much going to look just like a morning star, but just flipped around the other way. So in this case, we're going to start off with a strong move up in a big green candle, followed by a much smaller candle with a very small real body, followed lastly by a large red candle to the downside, closing just around the price where the first candlestick actually open. If we think back again to what this would look like if these three candles were actually put together into one single candle. That is going to give us something along the lines of what we have here on this slide. Because we have our opening price down here. This dot kids a load down here before bouncing back up. And in the second candle that hits this high before coming back down. And the third candle closing just above the price of where the first candle steak actually opened. So that's why this candle would look the way that it would if these were to be combined into one single candle. And now just thinking back to what we talked about again earlier on in the course, we know that these long upper wigs on candle sticks tells us that at some point within this candle, the sellers and the supply started to take control of the stalk. And that's why when the stock price rose up here, there was pretty much immediately pushed back down before that canto steak actually closed. So that's going to represent a shift in the supply and demand. And that's why this is going to be a bearish reversal indicator, which is then often going to be followed by a strong are moved to the downside. So just going through this again, click by click. Just keep an eye out for the evening star pattern and then see how the price of the stock reacts to it. So you can see right in the middle of the chart we do see a nice evening star pattern. The stock spikes up into that high. We get R1 strong green candle right here, followed by a second candles take with a much smaller real body, followed by Lastly another candlestick, this one also being large, but this time to the downside and being a red candle, which closes slightly above the open of the first candle. And that's going to give us our evening star pattern. This is again going to actually be confirmed once that third candlestick actually closes. So if you were looking to take a short position in this case to profit from the downward move that happens later on, would you would want to do is wait for that third canvas stake in the evening star pattern to form. And then look to take your short position around here in these next couple of candles. And in this case, it would've worked out beautifully as the stock price stayed, come straight back down after that bearish reversal pattern formed. So you can see that these are very simple but very valuable candle sake patterns. And if you stay tuned for the next section of the course, we're going to go over a few more reversal patterns in the market, which are called the hammer and the hanging man candles. 12. Hammer & Hanging Man: All right, moving on to the next reversal candlestick pattern is one is known as the hammer candlestick, and this is also going to be a bullish reversal pattern. So this is going to go really into the same category as the bullish and golfing, as well as the morning star pattern that we talked about in the previous section. So what a hammer candlestick is in a way that it forms really is when the price of the stock falls significantly within the candle. But at some point the buyers are able to push the price back up and the stock rallies backup near the opening price before that candle steak actually closes. And again, since this is a bullish reversal indicator, it's most often going to be found at the bottom of a MOOC down or even at the end of an entire downtrend. And you can see with this diagram example essentially what the hammer candlestick is going to look like. We are of course, going to start off with our MOOC down. Following now we get our hammer candlestick. We see our opening price right here. The price of that stock falls all the way down here before the buyers drive the price right back up. And the candlestick actually closes up near the high before then running higher after that candle stick is formed. And again, pretty much just like any other bullish reversal indicator that we've talked about. This one is also going to have a very long lower wick on the candlestick, which is still going to represent to us when that shift in the supply and the demand. And down here at these prices, the demand is starting to take control. And that's what's pushing the price of the stock backup. So as we go through this example with AMD, just keep your eyes peeled for the hammer candlestick pattern and we'll see how the price of the stock actually reacts to it forming. All right, so you can see down here at the bottom of the chart, we see our hammer candlestick actually start to form. And actually if you look just before that, we also see this big red candle here that has a very long lower wick on it. So going back to what we talked about earlier in the course, you want to try to pair as many things together as possible to give you the best chances of success with your trading. And this is a great example of that because not only do we see this bullish reversal pattern, that of course being the hammer candlestick. But we also see a few candles prior to that that have very long lower wigs on the candle sticks, which we do know is a very common bullish reversal sign. But anyway, in this example following that pool back to the downside, we get our hammer, a candlestick. And you can see that there is a very clear and very strong reversal then to the upside of following that pattern. And now moving onto the hanging man candlestick pattern. The same way that we kinda had the polar opposites when we talked about the Morning Star and the Evening Star, as well as the bullish and bearish and golfing. This is essentially going to be the exact opposite of what the hammer candlestick pattern was. So the hanging man candlestick pattern is going to be a bearish reversal, downside, allowing us to sell or short sell up near the high of the move. And what this is going to look like is essentially just a hammer, candlestick that forms at the top of move after a strong wound up, or even a complete up trend. So if we take a look at this diagram here, you can see that we start off initially with our strong move up and we get our hanging man candles steak, which again is going to look very similar to the hammer candlestick that we previously talked about. And following that, we are going to see that a reversal to the downside, allowing us to sell our position and lock-in profits up near the high or even short sell to them profit from that bearish reversal. So that way we can later on cover at a lower price. Now the hanging man candlestick is a little bit different from all of the ones really that we've talked about so far up until now in this course. And the reason for that is because I've always mentioned that these long lower wigs on the candle sticks are typically going to be a bullish indicator in the market, going to indicate usually a reversal to the upside. So now when we see this hanging, may candles sake, it's really going to be kind of the opposite of what we talked about all throughout the rest of the course. And the only difference in this case with the hanging man is that we're seeing these long lower wigs after the stock already had a very strong move to the upside. So if we kinda, the psychology behind this move, really what this is telling us is that there's been a strong and steady move to the upside. And now in this hanging man candlestick, because we saw this quick sell off to the downside, even though it did end up making its way back up. That's a sign that the buying pressure that we previously saw while the Salk was being pushed up is not quite as strong as it was before. And that's why this hanging Mann-Kendall say pattern is often to startup a bearish move to the downside. So is always just to kinda help you practice looking for these patterns and real-time once you start looking for them in your own trading, I'm gonna go ahead and play this screen recording and all I want you to do is look out for this hanging man candlestick pattern. And of course you see how the price of the stock reacts to it forming. All right, so you can see here up at the top of the MOOC we see are hanging man candlestick pattern. The stock is kind of chopping around, going bedside ways for awhile. And then it starts to look like it's actually going to break out because it's moving above that most recent high. And that's gonna make traders believe that this is starting to form higher highs and higher lows. And that's going to lead people to believe that this is going to be the start of an up trend. However, those that know about these candles sake patterns would hopefully be able to spot this hanging me and candlestick pattern and see that this is a potential reversal point in the market. And once that candlestick does form, what we see is a reversal straight back to the downside, and it actually ends up going significantly lower than it was earlier on in the morning. So again, although it may seem very simple, these hammer in hanging man candlestick patterns can be a very simple yet effective ways to help you spot potential reversal points in the market. So make sure to keep an eye out for them while you're doing your own trading and analysis. And with that being said, that's going to be a rap on the reversal section of this course. So stay tuned for the next section when we started to go over continuation patterns in the market, which are hopefully going to allow you to ride the momentum of a stock, whether it be to the upside or the downside for a profitable trade. 13. Mat Hold Pattern: The first continuation candlestick pattern that we're going to be talking about in this section of the course is going to be known as the mat hold pattern. Now again, because this is a continuation candlestick pattern, it's going to be a little bit different from the reversal patterns that we talked about in the previous sections of this course. And what a continuation pattern is going to do is for example, if a stock was in an up trend and we see a continuation pattern forming, that's going to indicate to us that that trend is likely to continue. And the same is going to be true for a downtrend. If we see a downtrend and then a continuation pattern forming, that's going to tell us the trend is likely to continue downwards. So anyway, this mat hold pattern is going to be continuation candlestick pattern. This time actually made up of five separate candles stakes. That is going to indicate to us either a bullish or bearish continuation. And that's going to be of course, dependent on which direction the trend is moving in the first place. So with that being said, let's start off with a bullish Mcal. This is going to be made up of two tall green candles with three smaller red candles in between. There's bullish map. Old pattern is going to be confirmed once that fifth and final green candlestick actually closes above the high of all of the other candles that happen before it in this pattern. So really what that's going to look like is something along the lines of what we have done here in this diagram example at the bottom, you can see, of course are tall. You can see of course, the tall green candlestick that starts off the pattern. We have our three much smaller red candle sticks that fill up the middle of the pattern. Followed by then the one green candlestick that actually ends up closing above the high of the previous four candles in this pattern. And again, that is when this pattern is going to be confirmed. So that is when you would want to look to actually enter into the trade to then profit from that Polish continuation to the upside. Now, as always on this ladder, have some practice to help you spot these patterns in real time. So I'm going to play this game, just keep an eye out for this bullish Mac old pattern and then see how the price of the stock reacts to it forming. Alright, so you can see pretty clearly at the bottom left of this chart, we do have our bullish Matt hold pattern that forms. We start off with our move up. We're already in an up trend in this stock. So of course, this pattern is going to be a continuation of that trend and it's going to be an opportunity for us to buy into this trend, into really rod that upward momentum of the sock. But what we see is our first big green candlestick. Following that, we see three smaller red candle sticks. And last but not least, we're going to finish off the pattern, of course, without one green candlestick that is going to actually close above the high of the previous four candles. Again, that's when this pattern is confirmed. So with that being said, you would be looking to buy into the stock over the next couple of candle sticks. And from this example, you would have been able to make a great prophet as the stock broke out of that pattern right here at about $7.40. And really just about an hour or two hours later. You can see that stock really started to rocket to the upside and actually ended up hitting a dollar per share. So again, because this is the Polish Matt hold pattern, this is going to allow you to take advantage of that upward momentum and profit from buying and selling shares in a stock. Now of course, on the other side of this, you can always look to actually short-sell, to profit from stocks going down as well. And that's really when the bearish map old pattern is going to come into place. And this is of course going to be pretty much the exact opposite of the bullish map old pattern. And with that being said, it's going to be made up of two tall red candles. This time with three smaller green candles in the middle. And this pattern is going to be confirmed when the final read Canto actually closes below the lowest point of the previous four candles. So that confirmation is what you would want to use for entering into a short position to then profit from that downward momentum that the stock has. And if we take this example here, we can go ahead and play the screen recording. And as always, just keep your eye out for the old pattern. See how the price of the stock reacts to it forming. So you can see here that we do have a bearish manifold hold pattern. We see our big red candles take here, followed by three smaller green candle sticks. And lastly, our fifth candlestick, this one closing below the low of the previous four candle sticks. That's going to confirm this bearish Matt hold pattern. So you would look to short sell anywhere in this area over the next couple of candles. And you can see that this is actually not going to be a picture perfect example. And I wanted to include this in here because everything's not always going to be picture perfect. I want to hopefully best prepare you for real life trading and not always give you the best cookie cutter examples. And this is a perfect example of that. So you can see that after this pattern actually forms, the stock does start to look like it's reversing to the upside, which is really the exact opposite of what this bearish Mac, old pattern is going to do. However, very shortly after the stock breaks above the high of this map, old pattern, you can see it pretty much reverses straight back to the downside and actually ends up selling off almost $2 from this high up here down to this low down here. So this would have been a great opportunity to look to short sell really anywhere into this move after this pattern was formed to then profit from this bearish move that happens later on in the day. 14. 3 Methods Pattern: Alright, so to finish up with this continuation Patterns section of the course, I want to cover what is known as the three methods pattern, which again is going to also be a bullish or bearish pattern. And since this is a continuation pattern, that is going to be dependent on whether the trend was going through the upside or the downside before the pattern was formed. Now if you look at the diagram at the bottom of the page, you can probably see that this is very similar to the pattern that we previously went over, which was the mat hold pattern. But there is going to be one slight difference between the two. And that difference is with the three methods pattern. You can see that these three middle candles here actually fall within the range of the first candle. And when we talk about the old pattern, that's not always going to be the case. Three candles in the middle can be a little bit outside of the range of the first candle, but as long as it's one green candlestick followed by three red Campbell six, followed by a green candlestick that closes above the high of the previous four candles in the pattern. Than that Matt hold pattern would be confirmed and that would be a sign of a continuation to the upside. However, with the bullish three methods pattern, these three candles do of course have to fall within the range, meaning between the high and the low of this first candle. Now because of that and because of the rural is being a little bit more strict than those of the bullish met, old pattern. This is going to be slightly less common to see. However, it is also known to be a little bit more accurate than the bullish map old pattern. So it is definitely one that I wanted to cover in this course. And it's definitely one that you should also keep your eyes out for while you're doing your trading. Now with all that being said, this is of course also going to be a five candlestick pattern. We're going to start off with a strong green candlestick to the upside, followed by R3, right? Candles takes, again, fitting into the range of that first candlestick. And last but not least, the one green candlestick at the end, which is going to break above and actually close above the highest point of the previous four candles in the pattern. So as always, to help you practice spotting these in real time, I'm gonna go ahead and play this screen recording and I want you to just keep your eyes out for that foolish three methods, pattern, and see how the price of the stock reacts to it forming. So you can see right as the stock market opens further day, in this case, we get our bullish three methods. We can of course see that the trend in the first place was going to the upside. And because this is a continuation pattern, is going to indicate that that trend is then likely to continue to the upside afterwards. And what we see is our first green candlestick form right here, followed by our three smaller red candle sticks that fit once again into the range of that first green candlestick. And last but not least, we get our green candlestick that breaks above the high encloses above the high of those previous four candles. And from there that's going to be our confirmation. So you would look to buy over the next couple of candle sticks, and that would of course allow you to buy into this stock down here really in the low $18. And shortly after that pattern formed, the stock bounces up and continues all the way up. Later on hitting a high of $20 in thirty-seven cents. Okay. Now, just like we had the bullish and the bearish Matt holds, we also of course are going to have a bullish and bearish three methods. So the bearish three methods pattern is going to be very similar to the bearish map old pattern. Again, the only difference being that those three middle candles are going to actually fit and stay within the range. That first red candlestick, the bears three methods is also going to be made up of five candle sticks. And it's also going to be confirmed once that last candlestick closes below the lowest point of the previous four candles in the pattern. So if I go ahead and play this screen recording here, you're going to be able to see a bearish three methods, pattern form. And being that this is a bearish continuation pattern, we're going to start off with a move to the downside, followed by our pattern, followed lastly by a continuation to that downside move. So you can see we get our downside move there. And right there in the middle of the chart you can see are bearish three methods, pattern forum. We start off with our move to the downside. Following that, we get our red candle with our three green candles that fit within the range of that first red candle. And lastly, we get our rectangle steak that closes below the low of the previous four candles in the pattern. And from there you can see that the stock continues downward after that pattern is formed. So anyway, with that being said, both the bullish and bearish three methods and Matt hold patterns are great ways to really help you take advantage of the momentum in the market. Whether it be to the upside and inside, and whether it be buying and selling or short selling and covering. So I highly recommend keeping these patterns in your mind while you're doing your trading and investing, and keep an eye out for them while you're doing your analysis. With that being said, a great way to practice spotting these in real time is to just go into your burgers platform or you're charting platform. Zoom into the chart a little bit and go click by click like we've done in these examples throughout the course. And just see if you can spot any patterns as you're going candle by candle and click by click. And as always see how the stock reacts to that pattern forming so that we are going to be best prepared to take advantage of that pattern and to profit from that pattern while you're doing your real-time trading and investing. 15. Gaps Between Candlesticks: Alright, in this section of the course, I want to go over what are known as candlestick gaps. Gaps can actually start to form between candle sticks when the close price of one a significantly lower or significantly higher than the open price of the following candlestick. And many times what we see happen is that this happens on the daily chart when there's a large movement happens in the stocks, extended hours trading. So extended hours trading is after regular market hours. And that can be either in pre-market or in after hours. And this is actually the time when companies put out their news. So because that news is going to greatly affect the price of a stock, in most cases, it's very common for these stocks to have large moves in either after hours or pre-market following day. Which is then going to cause these gaps in the candles six because that extended hours trading is not going to show up on the daily chart. So just to give an example of this, we have this stock symbol K CAC. And over here on the left side you can see we have the five-minute chart, and on the right side we have the daily chart. And if we take a look at the five-minute chart first, you can see that in the background here we have a little bit of a grey background when it goes to the black over here. That's when the market actually opens for the day. So right here, this is 930 AM Eastern Standard time when the market opens and everything that happens in the gray period before that actually happened in the pre-market trading. So when the stock made this big move down here from about $10 per share all the way up to about when it opened for the day. All of that happening in extended hours trading. And again, because this extended hours trading is not shown on the daily chart, it's just going to appear as a big gap on the daily chart. And you're simply going to see on the next Daily candlestick or this dock open for the day. And of course where it hit as the high the low end where it then close. But I wanted to include this section in the course to not only explain to you why candle sticks can't actually form gaps between them. Because I do know that a lot of new traders are a little bit confused by that. But also on top of that, there are actually quite a few different gap trading strategies that you can use for both midterm in short-term trading. And we're actually going to go over a few of those in the next section. And before we move on to those strategies themselves, just to give you one more quick example here, we have the stock symbol, a CST. And again we have the five-minute chart on the left with the daily chart over here on the right. And we can see that a CST had a very strong moved down from about $0.76 per share all the way down to about $0.25 per share in extended hours trading. And of course, this is probably due to some kind of negative catalyst or piece of news that was put out by the company. But again, because this happened in extended hours trading, that's just going to show up as a gap on the daily chart. And that's exactly what we see over here when we look at the daily chart. And this is definitely a very extreme example of a gap. They're not always going to be this big, that can be much, much smaller. For example, if we look a little bit beforehand on the daily chart, you can actually see a pretty small gap here that happened a few months back. And another one up here in the red candles that happened about a month before that. Not nearly as big, of course, as the one that we're using for this example. But they are pretty common in the market and they can lead to some great trade opportunities. So if you stay tuned for the next section, we're going to actually talk about one of these gap trading strategies. And it is one that is known as the gap close reversal. 16. Gap Close Reversal Strategy: Alright, so now that you know about gaps and how they can form between candles stakes, mostly on the daily chart. I also wanted to share with you one of the most commonly used gap trading strategies. And that's what is known as the gap close reversal. Now this is a strategy that lets you actually take advantage of the gaps that form in the market. And this is also a strategy that can be used for both long traders, meaning people that buy and sell shares regularly, or even traders that prefer to short sell. By profiting from a stock coming down. It's going to be dependent on whether the gap is above or below the current price of a stock or regardless. This can be used on either side of the spectrum. And it's a really great strategy for capitalizing on these gaps. And the way that this works is by looking for these gaps and realizing that gaps tend to be filled over time. Once these gaps are filled, the way that you actually take your trade is by looking for the stock to reverse in the opposite direction from the price that the gap was filled out. So let me show you what I mean by this and the first example. And this would be an example where you would be buying into the stock because the gap happened to be below and the stock was closing in to the downside. So if we look down here at the example with bioassay, we're looking at the one-day chart. So each of these candles is one entire day of price action. And you can see that on this day, the stock had a significant gap up from about thirty-six cents per share, all the way up to the opening price of about $0.57 the following day. Now because that was a big move that clearly happened in extended hours trading. That of course, is what caused this large gap to appear on the daily chart. Now the reason that you can actually take advantage of this and look to buy the stock is because later on a few days and even weeks later, you can see this doc is pulling all the way back down to where this closed at previous day before this initial gap up. Once it gets down to that closing price, that's when the gap is actually going to be considered closed. And again, many times these stocks, after closing the gaps, ten to reverse back to the other side. So because it's coming to the downside and it's closing that gap. You would be looking at this as an opportunity in this area to buy the stock and profit from this gap close reversal. And if we look a bit ahead in the future, you can see that the stock gets all the way back up to about $0.60 per share on multiple different occasion. So buying into this stock on the pullback by using this gap close reversal strategy down here in the thirties and even the forties would be a great trade and Khaliji some great profits had you bought and then sewed up into these spikes that happen later on. And that's really the whole concept of the strategy by looking at these gaps, waiting for them to close. And I'm looking for a reversal off of that gap close. And again to take the other side of the spectrum, these can also be used for a short selling as well. So in this case, when you're looking to short sell a gap close reversal, that would mean that the gap is above the current price and the stock is spiking into that gap close. Many times after that gap closes, it happens to turn into a level of resistance which you can then use to actually short-sell and profit from the stock reversing back to the downside. So again, if we take the example that we have here with SEO n, we are also looking at the daily chart on this one as well. And you can see that on this day here we have a gap down from the close price, right at about $0.58 down here to where it opened at about $0.47. So on the daily chart, there is a small gap there that is eventually most likely going to be filled over time. And you can see about a month later as the stock then spikes up into that gap, it eventually does get filled right here on this day. And then if we fast forward about a month later, it also does it again here on this day. And you can see that from both times that it spiked up into that gap close, that is going to act as a perfect level of resistance in both times that it spiked into that resistance, it reverse straight back to the downside. And on this day you can see that it got all the way up to about $0.57. It filled that gap once again, and then it reversed all the way back down to about a month later being below $0.25 per share. So by taking a short sale position in that, you would actually be able to profit from this bearish reversal. And you'd be able to sell up here in the fifties and then later on be able to buy back below $0.25 per share. So regardless of your trading style, whether it be to the upside or the downside, you can see how valuable having this trading strategy can be. The key to really making the most of this strategy is to wait for a confirmation of a reversal at the Gap clothes. You don't want to simply expect that gap to be closed and for the stock to automatically reverse. Because at the end of the day there's nothing that's going to work a 100% of the market. So you never want to simply expect something to happen. Instead of trying to predict that action. Wait for it to happen and then react to it. And what I mean by that is two, for the gap to close and then wait for some kind of reversal candlestick pattern to form at that gap close level. And then go ahead and look to use the gap close refers or strategy to profit from that reversal.