Okay I decided to write up this and share since it makes amazing amounts of sense.
Have you ever wondered why Japanese candle sticks work really well if utilized correctly. Here's a few reasons for this.
1. Trapped and exiting traders move markets.
2. Market manufacturers, Banks, and Institutions use the very same tricks over and over again and they seem about the same each time. You cant teach a market new tricks.
3. Patterns fail I know that seems dumb to get a reason that they actually work but youll understand later.
1. Every activity is paired with the opposite action. A buyer has bought from a vendor and vice versa. The best chances to earn money in moves are if people change their thoughts impulsively. Actually that is the only time an trader should place an order.
I understand most would like to believe the market is not manipulated but it is and its not a bad thing (such as the wise traders anyways). The only reason (lets use rallies for instance ) rallies occur is because the many heavily invested institutions need to unload or sell their stock in a great price for their customers. The institution and clever investors/traders follow the belief to make money its the only way the path of least resistance.
Trapped and exiting traders are often used create reversals and continuations.
Example one Is the
USD/JPY pair that has been very orderly on the 1HR period frame.
Alpha A notes that a classic reversal bar that many would have shorted in the break of its lover limit. So Here we have the majority of the investing public brief (they've sold something that they did not own that would need them to buy to depart ). The subsequent two hour more and more went brief dropping the price further and further. The majority of the traders who bought the service at 1 would have exited at the A change pub. So a big majority of interday traders could happen to be trading or covering long positions. B notes buyer or Covering Shorts which arguable can be brought about by one or another. Institutions would like to buy more for their customers they understand that if they begin buying they will get the Bears nervous and depart and they're able to scoop up a lot in a great price. Irrespective of the true reason we just trade the motion. So it does not really matter. Any who as price action begins moving higher and higher the shorts from A who haven't covered since they HOPE (Hope is an evil entity in trading) to get out in a better price lose all hope and depart in mass. The old shorts and new longs start a buying frenzy. Bear in mind the bears will need to buy to depart along with the buyers that want to enter will buy. There you go Trapped and exiting traders move markets.
Attachment 404851
2. The tips nevery change they are always the same. To establish that this I will deconstruct a change bar on a daily pub. I picked a daily pub because its the easiest to dive deeper into contrasted to a smaller time period the premise is exactly the same on all time frames but its harder to demonstarate and is much clearer for beginners.
Attachment 404852
Classic daily Reversal pub Little or no over lap with the last bar and a giant sign of strength with a large tail.
Here in between the lines is the same pub but today each bar represents 4HRs
There are a few key items to to note here this is not the best case but try to trace me. Support A has been disproved and is being shorted on pub B but something occurs deeper in pub B.
RED - HIGH of this day
TEAL - OPEN and Close are very Close
Green - Low of the day
Support A has neglected Shorts Galore following the collapse Bar B has been all shorts but pub C is enormous support forcing the less hopeful bears to depart early some held you can be sure and a few even if brief later also they the ugly fact rears is head the market has gone LONG!!!!
Many Candle stick traders could have orders placed on the line and since the continuing bars deficiency highs which are lower compared to previous they will not exit quite yet. Hopefull Bears from all of the previous times will depart in mass coupled with new buyers as the USD/JPY proceeds up.
Its the oldest trick in the Market publication.
1. Belief I chose this bottom just like a professional look at it move
2. Hope oh man I hope it finds support again
3. Despair oh SHIT im never going to get out in a good price Abandon ship!
4. Delusional is not marked on the chart but this point is 100 pips lower than dispair.
3. So if everyone could only follow candle signal and make a lot of cash NO. Employing candle sticks takes expertise, patience and humility. Signals fail that is the very best thing about candle sticks. Belief is based on your understanding of reality. I believe that the euro will undo because of a candle rod pattern I enter the trade if my limit order is triggered. The euro climbs and fails need to know when to depart generally at a profit or break even. Its not educated enough taking reductions is GOOD! Everybody desires bullet proof systems which demand profit consistently. THIS IS A BUSINESS YOU RISK MONEY TO MAKE MONEY! Some business venture make cash and some dont but a wise company knows that you never bet the farm. KNOW and love your losses (Failed signals) its the price we pay. Plus you can always reverse your order when possible to take a failed signal and make money.
The only way to earn money in almost any market is to search for collapse and be there to capitalize on scared money.
1. Trapped, departing, new tendency (counter commerce ) traders move markets.
2. Candle stick signals are reliable since they are the inescapable foot printing of price action that may signal a change or continuation on if dissected on smaller time frames.
3. Candle sticks do neglect you need to know when to pull the plug on a trade or undo when necessary since you might be the person who will join the scared money.
To Conclude this content Candle stick would be the bees knees.
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