The Secret of Trading prevails here! School didn't taught you this...

 

Candlestick Charts

Trending Move

Ø  A move in the market right where the candles are trading in a direction of the trend and this candles are usually larger than usual.

Ø  In figure 0.1 with a red arrow is what we called a trending move, these are larger than usual.

Ø  Another example in figure 0.2 with blue arrows is what we call a trending move low.

Ø  When the range of the candle are getting smaller, that is one of the clues that market is making some significant changes underneath.

Figure 0.1

Figure 0.2

Retracement Move

Ø  Small range candles against direction of the trend, it’s just an opposite of a trending move.

Ø  Alert: Large range retracement move – whenever you look at a chance and you notice that the retracement move has a large range candle that is a signal to you that the market is about to undergo some major changes. What happens is usually the current market structure is likely to change after a large range retracement move. What usually follows is that the market will go into a range followed by a breakout.

Ø  Current market structure likely to change (range followed by).

Ø  Encircled part in figure 0.3 are an example of retracement move, if you notice the candles are smaller than the trending move.

What happens when the range of the candles get exceedingly large?

Ø  It signals that the underlying market structure is likely to change, means it breaks below very large retracement candle. Its telling you that that the nice strong uptrend is about to come to an end and the market would move into a range. This explains the same with the parabolic range.

Figure 0.3

 

Break of Structure

Ø  Uptrend:  Lower highs and lows

Ø  Downtrend: Higher highs and lows

-          If you get a break of structure, the market structure has invalidated the previous string.

Ø  Once you understood this concept, you will understand when is the best time to trade the market.

When to create the trends or how to know when the market is about to make a normal back or reversal or rather how to trade a trend?

-          Take a look for Figure 0.4, It shows or it gave us a signal tool that this market structure, something is changing – that’s the first clue. 2^nd clue, notice the retracement move at bottom in which it shows a stronger retracement move. 3^rd clue, you can actually see and compare the trending move up become weaker and weaker after giving a strong trending move up. You can essentially have a market entering a potential accumulation stage or put it in a limit of a range. You can already identify the highs and the lows over here. This trend clearly shows that the market structure has change.

 

Figure 0.4