Candlesticks What They Really Mean! March 3, 2018

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1 Candlesticks What They Really Mean! March 3, 2018 Active Trend Trading Dennis W. Wilborn

Disclaimer U.S. Government Required Disclaimer Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk.

2 Disclaimer U.S. Government Required Disclaimer Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don t trade with money you can t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this training. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. All Materials presented are for training purposes only. Traders should paper trade any new method prior to risk of personal capital. Past Performance is not a promise or guarantee of future performance. Copyright ATTS

3 If you don t know precisely what signal is yours & how you will size and manage your position STOP TRADING! ~Peter Brandt Copyright ATTS

4 Habits to Eliminate now Going into 2018 The Worst Habits/Beliefs most Traders Struggle with: The Disconnect between what we Think & Reality! Copyright ATTS

5 If Only We Really Understood. What do stock/etf charts really reflect? 1. The Combined belief of every person who is trading or not trading an entity at a specific moment 2. Decision & Indecision 3. Areas of Value where Institutions will likely take action Not understanding what s happening on the chart will result in trading against the probabilities

6 If Only We Really Understood. What do stock/etf charts really reflect? 4. Econ 101 Supply & Demand What Happens at a Value Area which has been conquered by Sellers (Lots of Supply)? What Happens at a Value Area which has been conquered by Buyers (Lots of Demand)?

7 If Only We Really Understood. When Institution buy or sell it leaves footprints! If we understand what the footprints are telling us, we will make better trading decisions! If a footprint identifies where a band of sellers are hanging out, what will you do? If a footprint identifies where band of buyers are hanging out what will you do? What s keeping you from acting?

8 Quality of Belief Determines Quality of Action Faulty Beliefs Lead to Faulty Actions! ~ Active Trend Trading Copyright ATTS

9 Candlestick History Charting method originating In Japan between the 18 th century & late 1800 s Potentially used by Japanese Rice Traders Introduced to Western Traders by Steve Nison in the 1990 s Knowledge base and trading importance expanded by Steve Bigalow Probability Studies By Thomas Bulkowski MAJOR NEWS CANDLESTICKS ARE NOT A TRADING STRATEGY!

10 What s the Difference? Bar Chart vs Candlesticks Bullish Bearish Close High Open Open Low Close

11 Primary & Best Candlestick Signals There are many, many Candlestick Patterns but these represent the Primary & Best, but do they Indecisive Doji's/Spinning Tops - Yes but are not trading triggers, Bullish Bearish Hammer Shooting Star Engulfing Patterns -- Minor Lows ** Engulfing Patterns Piercing Line Dark Cloud ** Morning Star Evening Star Harami Chance Harami Chance Inverted Hammer- Actually Bearish Hanging Man Actually Bullish Wicks, Size and Color Order

12 Golden Rule of Candlesticks Candlesticks and patterns require four criteria for proper interpretation: 1. A Completed Line (Must wait for the time period to finish!) 2. Location, Location, Location 3. Color 4. Shape & Size 5. UNDERSTAND WHO s IN CONTROL & WHO WON THE BATTLE

13 STOP!!! Bullish Bearish Close High Open Open Low Close The above is all true and good information to know, but does it help us trade better?

14 Develop New Understanding! Candlesticks provide information Length and color tell us who is in control A Large Green Candle tells us What? Who s in control Buyers or Sellers? Buyers High Low A Large Red Candle tells us What? Who s in control Buyers or Sellers? Sellers Candlesticks provide information they are not a trading Strategy

15 Develop New Understanding! Candlesticks provide information Length of the Wick defines levels of price rejection A Large Wicks little Green Body tells us What? Who s in control Buyers or Sellers? Buyers slightly - Indecision High Low A Large Wicks little Red Body tells us What? Who s in control Buyers or Sellers? Sellers slightly - Indecision Candlesticks provide information they are not a trading Strategy

16 Develop New Understanding! Candlesticks provide information Length of the Wick defines levels of price rejection A Large Wicks little Green Body tells us What? Who s in control Buyers or Sellers? Buyers But High Low A Large Wicks little Red Body tells us What? Who s in control Buyers or Sellers? Sellers But Candlesticks provide information they are not a trading Strategy

17 Develop New Understanding! Who is in Control? Who is in control now? Buyers Defines Buyers Bounce Zone or Buyers Area of Value Area where Institution will defend price Candlesticks provide information they are not a trading Strategy

18 Develop New Understanding! Who is in Control? Who is in control now? Sellers Defines Sellers Bounce Zone or Sellers Area of Value Area where Institution will not defend price - SELL, SELL, SELL Candlesticks provide information they are not a trading Strategy

19 Develop New Understanding! Who is in Control? Who is in control now? Sellers Defines Sellers Bounce Zone or Sellers Area of Value Area where Institution will not defend price - SELL, SELL, SELL Candlesticks provide information they are not a trading Strategy

20 Develop New Understanding! Who is in Control? Who is in control now? Buyers Defines Buyers Bounce Zone or Candlesticks provide information they are not a trading Strategy Buyers Area of Value Area where Institution will defend price

21 How Do We Use the new Understanding Identify: 1. Long Term Trend 2. Appropriate Value Zones 3. Plan to join either the Buyers or Sellers 4. Conditional orders with Entry, Stops & Profit Targets Chart Time

22 Other Considerations - Wicks: Long Shadows and Tails tell exactly where buyers or sellers are coming in to the trade Location Location Location Location Location

23 Questions Copyright ATTS

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