Candlestick Patterns Just The Ones You Need

Candlestick Patterns
Just the Ones You Need!
Presented by:
Active Trend Trading
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 stocks, 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.
Building Wealth
Stay Focused on the Process
Mark Douglas said: “What you want to do is become an expert at

just one particular type of behavior pattern that repeats itself with
some degree of frequency.
To become an expert, choose one simple trading system that

identifies a pattern, preferably one that is mechanical, instead of
mathematical, so that you will be working with a visual
representation of market behavior.”
Webb PhD, Paula T; Douglas, Mark. Becoming "The Disciplined Trader": Instilling a Comprehensive Winning
State of Mind
Copywrite ATTS
2007-2021 3
Candlesticks –
Just the Ones
You Need!
A c t i v e Tr e n d Tr a d i n g
D e n n i s W. W i l b o r n
“If you don’t know precisely what signal is yours & how you
will size and manage your position—STOP TRADING!
~Peter Brandt
Copywrite ATTS 2007-2021 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

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)?

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?

Quality of Belief Determines Quality of Action —
Faulty Beliefs Lead to Faulty Actions!
~ Active Trend Trading

History of Candlesticks Patterns…
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!

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

Remember
- Wicks: Long Shadows and Tails tell exactly where buyers or sellers are coming into the trade
Location Location
Location Location
Location
Other Considerations
- Size & Color: Larger candles are move predictive than Small Candles
- Color change from Red to big Green candle
- Color Change from Green to big Red Candle
Green Followed by Green Followed by

Big Red Big Red Green Followed by
Big Red
Big Red Followed Big Red Followed

by Green by Green
Big Red Followed

by Green
Questions
14 Copywrite ATTS 2007-2021

Candlestick Basics
Candles and Technical Analysis go together
Powerful Tools – Only partially understood by most traders
Immediate feedback on investors sentiment
Greatly improve Reward/Risk on every trade in all time frames
Be a detective – Look for the Convergence of Clues

Presentation Material by: Active Trend Traders

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

Primary & Best Candlestick Signals
There are many, many Candlestick Patterns but these

represent the Primary & Best
Indecisive
Doji's/Spinning Tops
Bullish Bearish
Hammer Hanging Man
Engulfing Patterns Engulfing Patterns
Piercing Line Dark Cloud
Harami Harami
Inverted Hammer Shooting Star
Morning Star Evening Star
Kicker Kicker

The Dynamic Doji—Watch for Small Bodies
- Doji’s and Spinning Tops show indecision between buyers &

sellers—Neither side is in control!
- Clues: When present at past support/resistance or moving

averages with indicator extended or divergent
- Price Action will tend to move in the direction of the open

after a Doji/Spinning Top

Doji/Spinning Top Bullish
How Many Clues? TNA Daily
53.25% in 18 Days
Would be comfortable trading this of
support at $27.06?
Doji’s at
Support
&
Clue: TSI Cross & MF 3 Line Cluster

Be a Detective: Search for Clues
TNA Weekly
151% in 140 Days
How Many Clues?

1. Doji
2. Strong Support?
3. Crossing & Divergent Indicators
2 1 4. Break Above 8 period EMA

Conclusion of Part 1

Candlestick Reversals Part 2

Hammers & Hanging Men
- The Basics Shape

Small Body
Shadow must be 2X the Body

Understanding what the line tell us?
- Buyers Wrestled control from sellers during the trading
period—but where it appears is equally important!
R - Shows levels & zones of support and resistance
What’s Important—Context & Convergence
1. Where the line forms—Uptrend or Downtrend?

2. Quality of the Candlestick
S 3. Magnitude/Range of the line—Bigger Better!
4. Other Clues
5. Defining Expectations & Failure of the Signal

Quality of the Signal is determined by:
1. Where the Line appears—How long has the preceding trend been in
place? Appearing after longer trends can have greater meaning
2. The Magnitude/Range of the Line
3. Convergence of other clues include:

▪ Identify Support/Resistance
▪ Proximity to Moving Averages
▪ Indicators

Hammer
Swing High
Only occurs after a downtrend.
Shadow must be 2X the Body
Expected move back to swing high,

trend lines or moving averages
Hammer Support

Hammer Convergence of Clues
41% in 28 Days
TNA 2/3/14
Note: Retested and

Bounced
What Happened

Hanging Man
Only occurs after an
Uptrend. Shadow must Resistance
be 2X the Body
Expected move back to

swing low, trend lines or
moving averages
Swing Low

Hanging Man Convergence of Clues
TNA 5-3-11
What Happened

Poor Quality Hammer or Hammer Failure
Two Hammer examples:
1. Too Close to Resistance of Moving Averages
2. Appearing shortly after a new downtrend
AAPL 10/2012

Poor Quality Hanging Men or Hanging Men Failure
Two Hanging Man examples:
1. The lower wick entry signal as never triggered
2. Pattern just coming out of consolidation—uptrend

yes but new uptrend
QIHU 4-2013

Secrets of Trading Hammers & Hanging Men
Understand the Parts:

Resistance
Zone 1. Stays in effect until a close violates signal high or low
2. Both are self confirming signals
3. High is Top of a Resistance Zone

Support
Action 4. Low is Bottom of a Support Zone
Zone
Points
5. Hammer—expect testing of the wick
6. Hammer use low of body as a stop after a breakout or with

Long legged Hammers
7. Hammer middle of wick can be early entry
8. Violating Low is max stop loss
9. Hanging Man violating high is max stop loss
10. Both May Appear with other candlestick reversal patterns

in series (Pay attention to this!)

Secrets of Trading Hammers
Opens above yesterday’s candle
Opens in Wick Entry 3
Entry 2
Stop From Entry 2 or 3
Opens in Wick
Entry 1 Next Day Entries & Stops
Hammer
1. Self confirming signals can be
entered day of signal
Max Stop Any Entry

Secrets of Trading Hanging Men
Max Stop Any Entry
Opens in Top Wick
Opens in Wick
Entry 1 Next Day Entries &
Stops Hammer
1. Self confirming signals
Opens in Lower Wick can be entered day of
signal
Opens in Lower Wick

Entry 2
Opens Below yesterday’s candle
Entry 3

Clue: Dissect Each Candlestick Signal
- Every Candlestick Signal can be broken down just like the Hammer & Hanging Man
- Use the small bodies to your benefit and plan trade Action Points for Entry & Exit
- Count the Clues

Shooting Star
Resistance Only occurs after a Uptrend. Body inside

previous days candle
Wick must be 2X Body
Color of candle doesn’t matter
Expected move back to swing low, trend

lines or moving averages
Swing Low

Shooting Star
Shooting Star
What are the Clues?
-10.74% Drops Low in 5 Days
Clue: Divergent TSI

Evening Star—Two Day Pattern
Resistance
Only occurs after a Uptrend. Body inside

2nd Down day closes at least ½ way down

candle from 2 days prior
Expected move back to swing low, trend

Swing Low

Evening Star
What are the Clues?

Expectations?
Evening Star
-13% Drops Low in 12 Days
Clue: TSI & MF Cross

Inverted Hammer
Swing High
Only occurs after a downtrend. Shadow
must be 2X the Body
Can be very powerful signal
Expected move back to swing high, trend

Hammer Support

Inverted Hammer
What are the Clues?
14%+ Gain to High in 13 Days
Inverted
Hammer
Clue: TSI & MF Crosses

End of Part 2


Morning Star—Two Day Pattern
Swing High Only occurs after a downtrend. Body inside
2nd up day closes at least ½ way up candle

from 2 days prior

Hammer Support

Morning Star
11%+ Gain from Signal to High in 2 Weeks
What are the Clues? 13%+ Gain from Second Signal in 2 Weeks
How many do we need?
Does the Morning Star
really matter?
Morning Star

Bullish Engulfing—Two Day Pattern
Swing High Only occurs after a downtrend. Completely
engulfs the previous days body.
Expected move back to swing high, trend lines

or moving averages
Support

Bullish Engulfing
12.8%+ Gain from Signal to

What are the Clues? High in 6 weeks
Bullish Engulfing
Clue: Divergent Stochastics

Bearish Engulfing
Only occurs after a Uptrend. Completely
Resistance engulfs the previous days body.
Expected move back to Swing Low, trend

Swing Low
Bearish Engulfing
What are the Clues? Bearish Engulfing
12.8%+ Gain from Signal to

High in 6 weeks
What’s This?
Clue: Divergent Stochastics

Piercing Line
Swing High Only occurs after a downtrend. Must

open below and close more than ½
way up preceding candle.
Expected move back to swing high,

Support

Piercing Line
70%+ Move from Signal to

What are the Clues? High in 2 Months
Piercing Line
Clue: Oversold Stochastics

Dark Cloud
Only occurs after a uptrend. Must

Resistance open above and close more than ½
way down preceding candle.
Expected move back to swing low,

Swing Low

Dark Cloud
What are the Clues? Dark Cloud
-9% Drop from Signal to Low

in 2 days
Clue: Weak Stochastics

Bullish Harami
Swing High Only occurs after a downtrend. Body inside
One of the most powerful signals
Only Two Clues Needed


Bullish Harami
13%+ Gain from Signal to High in 4 Weeks
What are the Clues?
Bullish Harami
Clue: Oversold Stochastics Turning Up

Bearish Harami
Only occurs after a Uptrend. Body inside
One of the most powerful signals
Only Two Clues Needed
Expected move back to swing low, trend lines

or moving averages
Swing Low

Bearish Harami
Bearish Harami
What are the Clues?
-20% Drop from Signal to

Low in 5 Weeks
Clue: Divergent Stochastics Turning Down

End of Part 3


Kicker Signal
• Rare but very powerful
• 2 Day Pattern
• Investor Sentiment:
• Bullish Kicker: Downtrend, a capitulation like move down, followed the next
day by a gap up move
• Bearish Kicker: Uptrend, Exhaustion move up, followed by a gap down move
the next day
• Strong Reversal Clue: Clues Needed Two

Kicker
Swing High Only occurs after a downtrend. Can follow sell
off gap down.
Very Powerful Signal
Next day opens up with a gap
Expected move back to swing high, trend lines

or moving averages
Gap up

Kicker—Bullish
What are the Clues? 19%+ Gain from Signal
How Many Are Needed? to High in 18 Days
Bullish Kicker
Clue: TSI & MF

Bearish Kicker
Only occurs after a uptrend. Can follow

exhaustion gap up.
Very Powerful Signal
Next day opens down with a gap
Gap Down Expected move back to swing Low, trend lines or

moving averages
Swing Low
Kicker—Bearish
What are the Clues?

Bearish Kicker
How Many Are Needed?
-66%+ Drop from Signal in 28 days
Clue: TSI & MF

Doji Sandwich
• Very Powerful
• 2 Day Pattern—Bullish or Bearish
• Investor Sentiment:
• Bullish: Strong move up and a pause with a doji then a new strong move
• Bearish: Strong move down and a pause with a doji then a strong move down
• Strong Clue: Clues Needed Two

Doji Sandwich Bullish
Uptrend Underway
Doji forms after a large bullish candle
Next day forms a doji

Doji
If prices open up the 3rd day will likely move
an equal distance as day 1

Doji Sandwich Bearish
Swing High
Down Trend Underway
Doji forms after a large Bearish candle
Next day forms a doji

Doji
If prices open down the 3rd day will likely
move an equal distance as day 1

Doji Sandwiches
Bearish DS
Bullish DS

End of Part 4

Live Examples
GO to the Charts!!

Clarify, Simplify & Multiply
T h i s h a s b e e n t h e M o t t o o f A c t i v e Tr e n d Tra d i n g f r o m t h e b e g i n n i n g !
We continuously work to Clarify & Simplify through refinements to

the system to make it objective and easy to both learn and use.
The purpose of all presentations is to provide our fellow Active

Tr e n d Tra d e r M e m b e r s a j u m p s t a r t t o a c c e l e ra t e p r o g r e s s u p t h e
Learning Curve.
We welcome suggestions on how to improve the learning process!
Tra d e W i s e l y & P r o f i t a b l y,
D e n n i s W. W i l b o r n
F o u n d e r & L e a d Te c h n i c a l A n a l y s t

Candlestick Patterns Just The Ones You Need

Uploaded by

Copyright:

Available Formats

You might also like

Candlestick Patterns Just The Ones You Need

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Candlestick Patterns Just The Ones You Need

Uploaded by

Copyright:

Available Formats

Candlestick Patterns

Just the Ones You Need!

Mark Douglas said: “What you want to do is become an expert at

To become an expert, choose one simple trading system that

Copywrite ATTS 2007-2021 5

2. Decision & Indecision

3. Areas of Value where Institutions will likely “take action”

Copywrite ATTS 2007-2021 6

4. Econ 101 – Supply & Demand

Copywrite ATTS 2007-2021 7

What’s keeping you from acting?

Copywrite ATTS 2007-2021 8

~ Active Trend Trading

Copywrite ATTS 2007-2021 9

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!

Copywrite ATTS 2007-2021 10

1. A Completed Line (Must wait for the time period to finish!)

2. Location, Location, Location

4. Shape & Size

5. UNDERSTAND WHO’s IN CONTROL & WHO WON THE BATTLE

Green Followed by Green Followed by

Big Red Followed Big Red Followed

Big Red Followed

14 Copywrite ATTS 2007-2021

Candles and Technical Analysis go together

Powerful Tools – Only partially understood by most traders

Immediate feedback on investors sentiment

Greatly improve Reward/Risk on every trade in all time frames

Be a detective – Look for the Convergence of Clues

Copywrite ATTS 2007-2021 15

Copywrite ATTS 2007-2021 16

There are many, many Candlestick Patterns but these

Copywrite ATTS 2007-2021 17

- Doji’s and Spinning Tops show indecision between buyers &

- Clues: When present at past support/resistance or moving

- Price Action will tend to move in the direction of the open

Copywrite ATTS 2007-2021 18

Copywrite ATTS 2007-2021 19

151% in 140 Days

How Many Clues?

2 1 4. Break Above 8 period EMA

Copywrite ATTS 2007-2021 20

Copywrite ATTS 2007-2021 21

Copywrite ATTS 2007-2021 22

- The Basics Shape

Shadow must be 2X the Body

Copywrite ATTS 2007-2021 23

R - Shows levels & zones of support and resistance

What’s Important—Context & Convergence

1. Where the line forms—Uptrend or Downtrend?

Copywrite ATTS 2007-2021 24

Quality of the Signal is determined by:

2. The Magnitude/Range of the Line