2.0. Learning to Profit from Futures Trading with an Unfair Advantage! The Master Trader Price Action Analysis

Transcription

1 2.0 Learning to Profit from Futures Trading with an Unfair Advantage! The Master Trader

2 Is an important concept in trading, whether you re a Day Trader, Swing Trader, or Position Trader. Is in-depth Price Bar / Candlestick knowledge that will help give you an EDGE over other Traders because most traders do not understand or take the time to learn what these trading principles mean. Is what we like to call Plain Vanilla Trading - you do NOT need to use any indicators/oscillators when determining where the market is most likely going to go next or at what levels the market is most likely going to test. The three primary Time Frames that we suggest using this type of Price Bar / Candlestick Analysis on are the Weekly, Daily, and 60 and/or 30 minute charts. Smaller time frames than the 30 minute chart may not be worth the effort in analyzing because of the small magnitude of the move(s) from these charts. The Weekly and Daily charts are great for Swing and Position Trading.

3 Price Bar / Candlestick Analysis Price Bar / Candlestick Analysis means to interpret what the OPEN, HIGH, LOW, and CLOSE did on a particular Price Bar / Candlestick and compare that criteria to the previous Price Bar / Candlestick in order to make intelligent conclusions about the market. The Price Bar / Candlestick s CLOSE helps confirm price action. The Price Bar / Candlestick s RANGE (HIGH minus LOW) confirms momentum. NOTE: Chart Illustrations and Diagrams are shown in both Price Bars and Candlesticks so as to appeal to different trader s personal preference of charts.

4 Price Bar / Candlestick Analysis Will provide the Trader precise insight to where the market is most likely going to trade next or at least what areas the market will most likely test. 1) First look at the current Price Bar / Candlestick, 2) Second analyze the previous Price Bar / Candlestick, 3) Third is the market TRENDING or trading SIDEWAYS? Will help you tremendously in zeroing in on what the market has done recently and what it s most likely going to do next with a HIGH PROBABILITY. Each type of Vertical Bar / Candlestick taught here says something about the market: They specifically will help you to determine what the market is most likely going to do in the following Vertical Bar / Candlestick (the following week, day, or next few hours), which will help assist you in what the market is trying to tell you and where it s headed to next and thereby will help you become a more successful trader.

5 Nine (9) Types of Vertical (Price) Bars / Candlesticks The Master Trader 1) Bullish Vertical Bar (BUVB) / Bullish Candlestick 2) Bearish Vertical Bar (BEVB) / Bearish Candlestick 3) Neutral Vertical Bar (NVB) 4) Outside Vertical Bar (OVB) 5) Inside Vertical Bar (IVB) 6) Expanded Range Vertical Bar (ERVB) 7) Weak Range Vertical Bar (WRVB) 8) Weak Inside Vertical Bar (WIVB) 9) Reversal Vertical Bar (RVB) Use the Weekly, Daily and 60 Minute and/or 30 Minute Charts to conduct Price Action studies.

6 Bullish Vertical Bar (BUVB) / Bullish Candlestick The Master Trader The Bullish Vertical Bar (BUVB) / Bullish Candlestick is when the CLOSE closes ABOVE the OPEN and in the TOP QUARTER of the Price Bar / Candlestick s RANGE. The BUVB will make a HIGHER HIGH and a HIGHER LOW than the Previous Bar, while CLOSING in the TOP QUARTER of the Vertical Bar's RANGE. This price action suggests the BULLS won and the likelihood of the market continuing up on the following price bar is probable: The market should at least test the BUVB's HIGH on the next Price Bar, and If, on the next Price Bar, the market opens lower and then moves up to TEST the HIGH of the BUVB and FAILS (or is unable to penetrate the HIGH by any substantial amount), then there is a good chance the market may reverse.

7 Bullish Vertical Bar (BUVB) / Bullish Candlestick If you choose to Swing Trade, the BUVB can also be very helpful in your analysis of the market: Confirmation the market is remaining strong: IF you are LONG and the current Vertical Bar is Bullish and/or the next Vertical Bar is also Bullish, THEN there is no reason to exit the trade. Continue this process until the market says something different. Warning signs the market may be changing directions: If you are LONG and a Bearish Vertical Bar (BEVB) (discussed next) appears, you would then tighten up your stop to below the highest BUVB's LOW. Once you have six or more consecutive BUVBs, trail your stop below the highest BUVB's LOW, because a market can only go so far before reversing or before it starts to retrace.

8 Bearish Vertical Bar (BEVB) / Bearish Candlestick The Master Trader The Bearish Vertical Bar (BEVB) / Bearish Candlestick is when the CLOSE closes BELOW the OPEN and in the BOTTOM QUARTER of the Price Bar / Candlestick s RANGE. The BEVB will make a LOWER HIGH and a LOWER LOW than the Previous Bar, while CLOSING in the BOTTOM QUARTER of the Vertical Bar's RANGE. This price action suggests the BEARS won and the likelihood of the market continuing down on the following price bar is probable: The market should at least test the BEVB's LOW on the next Price Bar, and If, on the next Price Bar, the market opens higher and then moves down to TEST the LOW of the BEVB and FAILS (or is unable to penetrate the LOW by any substantial amount), then there is a good chance the market may reverse.

9 Bearish Vertical Bar (BEVB) / Bearish Candlestick If you choose to Swing Trade, the BEVB can also be very helpful in your analysis of the market: Confirmation the market is remaining weak: IF you are SHORT and the current Vertical Bar is Bearish and/or the next Vertical Bar is also Bearish, THEN there is no reason to exit the trade. Continue this process until the market says something different. Warning signs the market may be changing directions: If you are SHORT and a Bullish Vertical Bar (BUVB) (discussed previously) appears, you would then tighten up your stop to above the highest BEVB's HIGH. Once you have six or more consecutive BEVBs, trail your stop above the highest BEVB's HIGH, because a market can only go so far before reversing or before it starts to retrace.

10 Neutral Vertical Bar (NVB) / Doji or Spinning Top The Neutral Vertical Bar (NVB) / Doji or Spinning Top is when the CLOSE of a Price Bar / Candlestick is EQUAL or within a few price increments of the OPEN of the same Price Bar / Candlestick AND the OPEN and CLOSE are near the MIDRANGE (50%) of the Price Bar / Candlestick. When a NVB becomes an Inside Vertical Bar (IVB -discussed shortly) coupled with being a Weak-Range Vertical Bar (WRVB - also discussed shortly), it makes the NVB most neutral. This type of Price Action denotes uncertainty in the marketplace: NVBs may indicate a reversal and/or are found near a reversal in the market. NVBs may indicate that a Trending Market may be stalling just before resuming in the direction of the original TREND.

11 Neutral Vertical Bar (NVB) / Doji or Spinning Top If you re a Day Trader, the NVB can also be very helpful in your analysis of the market: Identifying a NVB on the Daily Chart will help a Day Trader recognize that he/she should be both cautious and more alert as to what may happen with a high probability on the very next Day. For example Volatility usually increases after the NVB: Knowing this will alert a Day Trader to be more careful if he/she is attempting to BUY near the LOW or SELL near the HIGH of the NVB. Many Day Traders look to trade off of the previous Day s HIGH and LOW. However, a Day Trader should be on the lookout for a large potential move following the penetration of the HIGH or LOW of the NVB. The NVB does not give a strong bias to either side of the market (like the BUVB or BEVB). The NVB may also indicate that the market is attempting to enter into a Trading Range (Sideways Market). The more NVBs that are near one another, the greater the probability that the market has already begun a Trading Range on the Smaller Time Frame Chart.

12 Neutral Vertical Bar (NVB) / Doji or Spinning Top If you choose to Swing Trade, the NVB can also be very helpful in your analysis of the market because it may indicate one of two possible market scenarios: A potential Trend Reversal or A potential start of a Trading Range. For example If you are LONG and the market is making consecutively higher BUVBs confirming Bullish Price Action and a NVB develops. In order to protect profits, you may want to Trail your STOP UP to just below the LOW of the NVB or just below the LOW of the Vertical Bar preceding the NVB. This will help enable you to protect any profits that you may have. The NVB will help a Trader determine when the market may be trying to change directions or trying to enter into a trading range. Swing Traders should consider TIGHTENING up their STOPS when a few NVBs form on the Larger Time Frame Charts.

13 NVB at Market BOTTOMS, TOPS, & CONTINUATIONs

14 Doji & Spinning Top at BOTTOMS, TOPS, & CONTINUATIONs

15 Outside Vertical Bar (OVB) / Engulfing Pattern The Outside Vertical Bar (OVB) / Engulfing Pattern is when the HIGH is Higher than the Previous Bar / Candlestick's HIGH and the LOW is Lower than the Previous Bar / Candlestick's LOW. The OVB usually occurs after an IVB, WRVB, or WIVB (discussed very shortly) due to the volatility of the market. The OVB typically has the largest RANGE (RANGE = HIGH minus LOW) within the last few bars. The OVB s price action suggests one of two things: 1) some news event affected the market or 2) the market is beginning to TREND in the direction of the CLOSE of the OVB, unless the market is trading inside of a Trading Range. It s especially important to note where the OVB CLOSED and what extreme of the Previous Price Bar was exceeded first (the HIGH or LOW). It is very unlikely for a market to take out the opposite extreme of a Price Bar (HIGH or LOW) on the following Price Bar when that market CLOSES in the TOP or BOTTOM QUARTER of the OVB's RANGE. Since OVBs do not happen too frequently, you must be aware of their tendencies in order to take advantage of their predictability.

16 BULLISH Outside Vertical Bar (BUOVB) / BULLISH Engulfing If the OVB CLOSE is in the TOP QUARTER of the RANGE while the LOW of the Previous Price Bar was penetrated first, this indicates the market should take out the HIGH of the OVB or at least try to test it on the following Price Bar. Therefore, the LOW of the OVB should now act as SUPPORT for the next few Price Bars. In order for a BUOVB to occur, the LOW of the Previous Price Bar MUST BE EXCEEDED FIRST before reversing to take out the HIGH of the Previous Price Bar. You can determine with incredible accuracy how far the second penetration will travel by analyzing the first penetration.

17 BEARISH Outside Vertical Bar (BEOVB) / BEARISH Engulfing If the OVB CLOSE is in the BOTTOM QUARTER of the RANGE while the HIGH of the Previous Price Bar was penetrated first, this indicates the market should take out the LOW of the OVB or at least try to test it on the following Price Bar. Therefore, the HIGH of the OVB should now act as RESISTANCE for the next few Price Bars. In order for a BEOVB to occur, the HIGH of the Previous Price Bar MUST BE EXCEEDED FIRST before reversing to take out the LOW of the Previous Price Bar. You can determine with incredible accuracy how far the second penetration will travel by analyzing the first penetration.

18 Outside Vertical Bar (OVB) / Engulfing Pattern If you re a Day Trader, the OVB can also be very helpful in your analysis of the market: Identifying an OVB on the Daily Chart will definitely help a Day Trader enhance their predictability in the market they are trading the next Day. For example The Master Trader IF the Prior Day s HIGH was penetrated first before the market reverses and penetrates the Prior Day s LOW, you can simply subtract the amount of the first penetration from the Prior Day s LOW to arrive at the minimum price target. This price level is where the market will most likely travel to if the market moves down and penetrates through the Prior Day s LOW. IF the Prior Day s LOW was penetrated first before the market reverses and penetrates the Prior Day s HIGH, you can simply add the amount of the first penetration to the Prior Day s HIGH to arrive at the minimum price target. This price level is where the market will most likely travel to if the market moves up and penetrates through the Prior Day s HIGH. Knowing that the LOW of a Bullish OVB becomes SUPPORT for a few days, a Day Trader can use the HIGH and LOW of the BUOVB to calculate Bullish Fibonacci Retracements. Knowing that the HIGH of a Bearish OVB becomes RESISTANCE for a few days, a Day Trader can use the LOW and HIGH of the BEOVB to calculate Bearish Fibonacci Retracements.

19 Outside Vertical Bar (OVB) / Engulfing Pattern If you choose to Swing Trade, since OVBs do not happen too frequently, you can use the OVB to your benefit: OVBs give warning signs of two possible market scenarios: 1) IF you are in a TRADE and an OVB (BUOVB or BEOVB) develops, THEN IF you are LONG tighten up your stops to slightly BELOW the LOW of the OVB in order to protect any profits; the LOW of a BUOVB should act as SUPPORT for a few Price Bars, and the HIGH of a BEOVB may act as RESISTANCE. You can always look to re-enter a trade at a different price level. IF you are SHORT The Master Trader tighten up your stops to slightly ABOVE the HIGH of the OVB, in order to protect any profits; the HIGH of a BEOVB should act as RESISTANCE for a few Price Bars, and the LOW of a BUOVB may act as SUPPORT. You can always look to re-enter a trade at a different price level.

20 Outside Vertical Bar (OVB) / Engulfing Pattern 2) IF you are in a TRADE and an OVB (BUOVB or BEOVB) develops, THEN IF you are LONG and notice the HIGH of the Previous Price Bar is penetrated, you should therefore probably move your stop up to slightly BELOW the LOW of the Previous Price Bar but not until the HIGH is penetrated first. A BEOVB would have to occur on the Current Price Bar in order for you to be stopped out of a trade. Continue repeating this process until you are stopped out of your trade. The OVB is very helpful in gauging what a market is most likely going to do next. IF you are SHORT The Master Trader and notice the LOW of the Previous Price Bar is penetrated, you should therefore probably move your stop down to slightly ABOVE the HIGH of the Previous Price Bar but not until the LOW is penetrated first. A BUOVB would have to occur on the Current Price Bar in order for you to be stopped out of a trade. Continue repeating this process until you are stopped out of your trade. The OVB is very helpful in gauging what a market is most likely going to do next.

21 Inside Vertical Bar (IVB) / Harami Pattern The Inside Vertical Bar (IVB) / Harami Pattern is the opposite of the OVB / Engulfing Pattern. The HIGH and LOW both must be INSIDE the Previous Day / Candlestick s RANGE; therefore, the HIGH must be Lower than the Previous Day / Candlestick s HIGH and the LOW must be Higher than the Previous Day / Candlestick s LOW. Inside Vertical Bar (IVB) Bullish Harami Inside Vertical Bar (IVB) Bearish Harami

22 Inside Vertical Bar (IVB) / Harami Pattern The IVB price action is similar to the NVB, which warns of three potential patterns in the market: when a market is near a HIGH or LOW, this may suggest a Reversal, a potential Continuation of Trend if a market is in a Trend, and the IVB occurs roughly 10%-15% of the time and suggests indecision in the marketplace, whether a market is Trending or Non-Trending. Volatility usually increases within a few Price Bars following an IVB. Chances favor that an OVB is more likely to occur after an IVB because of the typically smaller range of the IVB. Having observed many IVBs on most markets, the observation has been this: When a market penetrates either up through the HIGH or down through the LOW on the Price Bar following an IVB, this represents a lot of Buying Pressure / Selling Pressure. If a market fails or penetrates the HIGH or LOW marginally AND then reverses and penetrates the opposite extreme LOW or HIGH on the same Price Bar (an OVB would occur), the second penetration will typically be a more powerful breakout.

23 Inside Vertical Bar (IVB) / Harami Pattern If you re a Day Trader, the IVB can also be very helpful in your analysis of the market: Identifying an IVB on the Daily Chart will allow a Day Trader to be on guard for a potential breakout the following day either up through the HIGH of the IVB or down through the LOW of the IVB and/or possibly both the HIGH and the LOW, which would form an OVB. For example Attempting to BUY a market near the LOW of the IVB the following day would be foolish because of the potential breakout to the downside. Instead, look for a breakout up through the HIGH of the IVB. Attempting to SELL a market near the HIGH of the IVB the following day also would be foolish because of the potential breakout to the upside. Instead, look for a breakout down through the LOW of the IVB.

24 Inside Vertical Bar (IVB) / Harami Pattern If you choose to Swing Trade, the IVB can also be very helpful in your analysis of the market because it may indicate one of three aforementioned possible market scenarios: A potential Trend Reversal, A potential Continuation of Trend, or A potential increase in Volatility Once you notice an IVB while in a trade, tighten up stops so as to protect profits and/or reduce risk. For example IF LONG and an IVB forms, move the stop UP to BELOW the LOW of the IVB. A more conservative approach would be to move the stop UP to BELOW the LOW of the Vertical Bar prior to the IVB to give the market a little more room to move. IF SHORT and an IVB forms, move the stop DOWN to ABOVE the HIGH of the IVB. A more conservative approach would be to move the stop DOWN to ABOVE the HIGH of the Vertical Bar prior to the IVB to give the market a little more room to move. The IVB represents indecision in the market; therefore, it s better safe than sorry to begin tightening up stops once this particular Price Bar is observed.

25 BUOVB, BEOVB, & IVBs at SUPPORT & RESISTANCE IVB (Downside Continuation) IVB (Upside Continuation)

26 Engulfing and Harami Patterns at SUPPORT & RESISTANCE

27 Expanded Range Vertical Bar (ERVB) The Expanded Range Vertical Bar (ERVB) is roughly 250% greater than the average range of the last ten or more Vertical Price Bars.

28 Expanded Range Vertical Bar (ERVB) The Expanded Range Vertical Bar (ERVB) is typically the largest Vertical Bar for the past 10 to 15 Price Bars. There will be times the ERVB will be an OVB, a BULLISH Vertical Bar (BUVB), a BEARISH Vertical Bar (BEVB), or a Neutral Vertical Bar (NVB) The ERVB usually denotes that either a TREND is beginning or that a Trading Range is just starting; regardless, the following Price Bar or two usually will be dull with little volatility before really starting to move again. Some traders might believe a market is recovering after an extended move before resuming its original TREND, while others might believe that a market is just beginning to consolidate.

29 Expanded Range Vertical Bar (ERVB) Since the ERVB is large in nature (in terms of RANGE), it s completely normal for a market to trade within the RANGE of the ERVB for the next couple days. If you re a Day Trader, you can take advantage of the ERVB. Identifying an ERVB on the Daily Chart will provide you with expectations of the next trading day. If the ERVB is BULLISH, then expect the LOW of the ERVB to act as SUPPORT. If the ERVB is BEARISH, then expect the HIGH of the ERVB to act as RESISTANCE. Use the HIGH and LOW of the ERVB to calculate Fibonacci retracement levels to trade off of, since the RANGE (HIGH minus LOW) of the ERVB is so large in nature. This will enable you to know what your boundaries are and what to expect the next trading day and/or even possibly the next couple trading days.

30 Expanded Range Vertical Bar (ERVB) If you choose to Swing Trade, you should also use this knowledge in deciphering what a market is most likely going to do. For example IF LONG and a Bullish ERVB forms, this will indicate that there is nothing to worry about and that the market is doing what is expected, which is to move HIGHER. On the other hand, if a Bearish ERVB develops, this specifically will alert you either to GET OUT of the trade or to move your stop UP to slightly BELOW the LOW of the ERVB. IF SHORT and a Bearish ERVB forms, this will indicate that there is nothing to worry about and that the market is doing what is expected, which is to move LOWER. On the other hand, if a Bullish ERVB develops, this specifically will alert you either to GET OUT of the trade or to move your stop DOWN to slightly ABOVE the HIGH of the ERVB. The ERVB indicates that a market is either going to start TRENDING in the direction of the CLOSE or that a market is simply going to start moving SIDEWAYS. There is also the slight possibility that a news event caused the ERVB. Therefore, ERVBs are good Price Bar Patterns to recognize for both Day Traders and Swing/Position Traders alike.

31 ERVB w/ LOW or HIGH defining SUPPORT / RESISTANCE

32 ERVB w/ LOW or HIGH defining SUPPORT / RESISTANCE

33 ERVB w/ HIGH or LOW defining RESISTANCE / SUPPORT

34 ERVB w/ HIGH or LOW defining RESISTANCE / SUPPORT

35 Weak Range Vertical Bar (WRVB) The Weak Range Vertical Bar (WRVB) is the smallest range (HIGH minus LOW) of the average range of the last ten or more Vertical Price Bars.

36 Weak Range Vertical Bar (WRVB) The Weak Range Vertical Bar (WRVB) typically will put a Trader in breakout mode because of the small size of the Price Bar s RANGE. WRVBs typically will indicate one of two things: potential indecision or a neutral reading in the market or a potential short-term change in trend The WRVB has a very similar type of interpretation to the IVB and WIVB (discussed next). If a market is TRENDING, a WRVB usually indicates the market will resume in the direction of the trend. If a market is trading SIDEWAYS, a WRVB usually indicates indecision in the market. Either way, a market generally will make an explosive move in either direction, and an increase in volatility is likely to occur.

37 Weak Range Vertical Bar (WRVB) If you re a Day Trader or a Swing Trader, you want to pay special attention to the WRVB when it occurs because there is generally a large market move (of increased volatility) within the next few Price Bars (if not the very next Price Bar). If you choose to Day Trade, you should be alert when WRVBs occur: Day Traders should NOT be BUYING near the LOW of the WRVB or SELLING near the HIGH of the WRVB, Day Traders should BUY the penetration of the HIGH of the WRVB and/or SELL the penetration of the LOW of the WRVB. A Breakout Trade is what you should be looking to do immediately following the WRVB. If you choose to Swing Trade, you should be alert when WRVBs occur: Swing/Position Traders should tighten stops on the following Price Bar, since you can expect an increase in volatility to occur shortly after the WRVB (if not the very next Price Bar).

38 WRVB at SUPPORT & RESISTANCE WRVB (Upside Continuation) WRVB (Downside Continuation)

39 Doji & Spinning Top at SUPPORT & RESISTANCE Spinning Top (Upside Continuation) Spinning Top (Downside Continuation)

40 Weak Inside Vertical Bar (WIVB) The Weak Inside Vertical Bar (WIVB) is two vertical Price Bars combined into one Price Bar Pattern: the Weak Range Vertical Bar (WRVB) and Inside Vertical Bar (IVB).

41 Weak Inside Vertical Bar (WIVB) The Weak Inside Vertical Bar (WIVB) is a very powerful breakout trade set-up because of the small size of the Price Bar s RANGE. WIVBs do not happen too frequently: A Trader should pay special attention to the WIVB because a market will generally make a large move through the HIGH and/or LOW (if not both) of the WIVB on the following Price Bar (thus creating an OVB). The more WIVBs a Trader gets in a row, the more powerful the breakout trade set-up becomes. WIVBs are actually a stronger breakout trade set-up than the WRVB because of the fact that WIVBs are inside the RANGE of the previous Price Bar.

42 Weak Inside Vertical Bar (WIVB) If you re a Day Trader or a Swing Trader, you want to pay special attention to the WIVB when it occurs because there is generally a large market move (of increased volatility) within the next few Price Bars (if not the very next Price Bar). If you choose to Day Trade, you should be alert when WIVBs occur: Day Traders should NOT be BUYING near the LOW of the WRVB or SELLING near the HIGH of the WIVB; Day Traders should BUY the penetration of the HIGH of the WIVB and/or SELL the penetration of the LOW of the WIVB. A Breakout Trade is what you should be looking to do immediately following the WIVB. If you choose to Swing Trade, you should be alert when WIVBs occur: Swing/Position Traders should tighten stops on the following Price Bar, since you can expect an increase in volatility to occur shortly after the WIVB (if not the very next Price Bar).

43 WIVB at SUPPORT & RESISTANCE WIVB (Upside Continuation) WIVB (Downside Continuation)

44 Doji & Spinning Top at SUPPORT & RESISTANCE Spinning Top (Upside Continuation) Doji (Upside Continuation) Spinning Top (Downside Continuation)

45 Reversal Vertical Bar (RVB) There are two types of Reversal Vertical Bars (RVB): the Bearish Reversal Vertical Bar (BERVB) and the Bullish Reversal Vertical Bar (BURVB) A Reversal Vertical Bar (RVB) should warn you that the market is trying to reverse at least for the short-term. The Price Bar following the RVB should have at least some follow-through in the direction of the CLOSE of the RVB (BERVB or BURVB). BEARISH Reversal Vertical Bar (BERVB) BULLISH Reversal Vertical Bar (BURVB)

46 BEARISH Reversal Vertical Bar (BERVB) / Dark Cloud Cover The BERVB / Dark Cloud Cover is when a market makes higher HIGHs and higher LOWs than the previous Vertical Bar / Candlestick and then CLOSES BELOW the OPEN of the same bar / candlestick in the LOWER QUARTER of the RANGE. The BERVB should warn you that the market may be trying to reverse: If a market is strong to the upside and a BERVB occurs while the market is testing a Major HIGH followed by some follow-through to the downside, the market may be setting up for a potential double top. Thus, when a market is testing a Major HIGH combined with a RVB, we like to call this a Key Reversal Bar (KRB). What s even more significant is an OVB (either Bullish or Bearish) or IVB occurring at a re-test of Major HIGHs.

47 BULLISH Reversal Vertical Bar (BURVB) / Piercing Line The BURVB / Piercing Line is when a market makes lower HIGHs and lower LOWs than the previous Vertical Bar / Candlestick and then CLOSES ABOVE the OPEN of the same bar / candlestick in the UPPER QUARTER of the RANGE. The BURVB should warn you that the market may be trying to reverse: If a market is weak (strong to the downside) and a BURVB occurs while the market is testing a Major LOW followed by some follow-through to the upside, the market may be setting up for a potential double bottom. Thus, when a market is testing a Major LOW combined with a RVB, we like to call this a Key Reversal Bar (KRB). What s even more significant is an OVB (either Bullish or Bearish) or IVB occurring at a re-test of Major LOWs.

48 Reversal Vertical Bar (RVB) If you re a Day Trader, pay special attention to RVB (BERVB and BURVB) set-ups coming into the next Trading Day expect at least some follow-through the next morning, especially when a market is testing a Major HIGH or Major LOW (KRB). A market could be setting up for a potential double top or double bottom. If a market is not testing a Major HIGH or Major LOW, follow-through back to the previous CLOSE and HIGH or LOW may not be as predictable due to the potential strength or weakness of the market at that particular time. If you choose to Swing Trade, you can also use this knowledge to your benefit. For example If you SELL SHORT and then you notice a BURVB, immediately tighten up your stop. If you BUY LONG and then you notice a BERVB, immediately tighten up your stop. The KRB should be a more significant alert, whereas RVBs (BERVBs and BURVBs) are not as significant (but still should be considered when tightening up stops). RVBs (BERVBs and BURVBs) and KRBs will warn you of potential changes in a market s trend at least for the short-term. Those of you that are swing/position traders can use this very crucial price action information to help confirm or deny your current trade position.

49 RVB at SUPPORT & RESISTANCE

50 Reversal Pattern at SUPPORT & RESISTANCE

51 Vertical Bar / Candlestick Patterns

52 Nine (9) Types of Vertical (Price) Bars

53 Candlestick Conversion

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