Understanding candlestick patterns and chart formations is key to great trading, it does help traders to learn what prices are most likely going to do next. Candlestick patterns work even better when they form part of a confluence of supporting factors such as trend, support and resistance. On top of tracking Pivot Points, Support, Resistance, our candlestick pattern indicator will instantly recognize the most profitable price action trading signals (see list below) across all markets to give you the best trading opportunities!

 

Candlestick Anatomy #

Candlestick Anatomy

First let's have a look at a candlestick anatomy.

 

A Candlestick is designed in three phases:

 

A High, a Low and a Body .

 

The extremes of the price movement, represented by lines extending from the body, are called “shadows or tails.”

 

The candlestick body shows the open and close prices while the shadows (which look like wicks) indicate the high and low price reached for that trading session.


The color of the candlestick body normally determines if the price has had a bullish (green) or bearish (orange) movement.

If you want to study more on this subject, there are several price action trading resources available on the web.
 

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Significant Pin Bar #

Significant Pin Bar

The Significant Pin Bar is one of the most powerful price action in trading.

 

What is a Significant pin bar?

The significant Pin Bar pattern consists of one candlestick.
Unlike standard pin bar, the tail of the candlestick is bigger than its body and at least 3 times bigger than its nose.

 

Why are significant pin bar patterns formed?

Significant Pin bar patterns are formed when prices are tested and rejected.

 

How to trade Significant pin bar patterns?

There are many ways to trade the significant pin bar pattern:

 

*Trading Significant Pin Bar in a trending market.

Trading Bullish Significant Pinbar in uptrend market.
pin-bar-uptrend

Trading Bearish Significant Pinbar in downtrend market.
pin bar-downtrend

 

*Trading Significant Pin Bar combo patterns in a trending market.

Trading a Significant Pin Bar which is also an inside bar in a trendy market.
inside-bar-pin-bar
See how easy it is to track combo patterns with our Price action Combo indicator.

 

*Trading Significant Pin Bar at key zones (support and resistance).

Trading bearish Significant Pin Bar at major resitance or trading bullish pinbar at major Support.
pin-bar-at-zone

 

Pin Bar Entry Strategies

There are three ways to enter a pin bar trade. They all have Pros and cons and really depend on the trader as well as the market conditions.

Aggressive entry (Pin Bar close Entry)

Pin bar-close-entry

Simply place a market entry.

 

Standard entry (Break of Pin Bar Nose Entry)

break-of-pin-bar-nose-entry

Enter on a break of the pin bar nose by placing a stop order just beyond the nose of the pin bar (1 or 2 pips).

 

Retracement Entry

Wait for the market to retrace to some extent before entering a trade.
Using retracement entry to get better Risk: Reward scenario can be very profitable but you might miss on a lot of trade if the market doesnt retrace.
Most traders always use the 50% retracement entry but before deciding of a % figure you should always ask yourself what kind of price action environment are you in? Are we in a trend or a range? What are previous high and previous low? And then decide where the retracement entry would make the more sense (could be 33%, 60% or even 75%).
Going for a 50% retrace entry each time will get you a retail traders entry, not a professional one.

 

Stop loss

Stop-loss

Stop loss is a level in the market that would need to be breached for you to be prove wrong and get you out of an investment.

A good rule of thumb is to place your stop loss few pips beyond the tail of the pin bar.

 

Pin Bar entry Example

 

*Aggressive entry (Pin Bar close Entry)

 

*Standard entry (Break of Pin Bar Nose Entry)

 

*Retracement Entry

As you can see with the previous examples, using different entry type can really increase your Risk: Reward Ratio.
Before entering a trade you should always determine a target and check if your R:R is worth placing that trade.

Our Position Size Calculator will allow you to decide if a trade is worth to take, when to enter it and what should be the right position sizing.

 

When to move stop loss

Once trade has triggered and price has moved in your favor a bit, you can move your stop loss to break even.
I personally move my stop loss to break even once a candle has closed above the 1:1 target.

 

Summary

Not all Significant Pin Bars are created equal, like all price action setups and patterns, they perform better when used in conjunction with a trend or key support and resistance levels, this is why using our Price action indicator and its price action filters is so important.

 

Should you want to learn more about Pin Bar trading, then feel free to check out this Price Action Course whereby Chris Capre teaches quantitative methods for trading pin bars and discuss live setups all the time.

 

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Key Engulfing Reversal #

Key Engulfing Reversal

The Key engulfing reversal pattern is one of the most popular price action pattern.

 

What is a Key Engulfing reversal pattern?

The Key Engulfing pattern consists of two candles.
The two candles must have opposite colour.

The body of the second candle engulfs the body and wick (tail) of the first candle.

 

Why are Key Engulfing reversal patterns formed?

The Key Engulfing reversal pattern represents a sudden shift in the order flow, which can often be a telling sign of a strong reversal coming.
It's a very good market sentiment indicator, notifying traders where more buyers or sellers have gotten in the market, forcing market to head in that signal's direction.

 

How to trade Key Engulfing reversal patterns?

Key Engulfing reversal patterns can be traded as a reversal candlestick pattern when found at the top or bottom of a short term trend and validated by support or resistance levels.

key-engulfing-zone

They can also be traded as a continuation pattern when a Key Engulfing reversal is formed within an established trend.

key-engulfing-trend

 

 

Where to Place your Entry, Stop Loss and Take Profit?

 

There are three ways to enter a Key Engulfing reversal trade. They all have Pros and cons and really depend on the trader as well as the market conditions.

 

Aggressive entry (Candle close Entry)

Engulfing-Close-Entry

Simply place a market entry.

 

Standard entry (Break of candle Entry)

Engulfing-Break-of-candle-Entry

Enter on a break of candle by placing a stop order just beyond the candle (1 or 2 pips).

 

Retracement Entry

Engulfing-Retrade-entry

Wait for the market to retrace to some extent before entering a trade.
Using retracement entry to get better Risk: Reward scenario can be very profitable but you might miss on a lot of trade if the market doesnt retrace.
Most traders always use the 50% retracement entry, but before deciding of a % figure you should always ask yourself what kind of price action environment are you in? Are we in a trend or a range? What are previous high and previous low? And then decide where the retracement entry would make the more sense (could be 33%, 60% or even 75%).
Going for a 50% retrace entry each time will get you a retail traders entry, not a professional one.

 

Stop loss

Engulfing-Stop-Loss

Stop loss is a level in the market that would need to be breached for you to be prove wrong and get you out of an investment.

A good rule of thumb is to place your stop loss few pips beyond the tail of the bar.

 

When to move Stop Loss

Once a trade has triggered and price has moved in your favor a bit, you can move your stop loss to break even.
I personally move my stop loss to break even once a candle has closed above the 1:1 target.

 

Take Profit

This is left to the trader’s discretion, however a good profit target is to use the next key level of resistance for a long trade, or the next key level of support for a short trade.
Traders should always aim for a return on investment higher than 2:1, if your Profit/Risk ratio is lower than 2:1 you may want to skip that trade or amend your Entry point in order to get a much better Profit/Risk ratio.

Our Position Size Calculator will allow you to decide if a trade is worth to take, when to enter it and what should be the right position sizing.

 

 

Summary

Key Engulfing reversal patterns are great to trade, but like all price action setups and patterns, they perform better when used in conjunction with a trend or key support and resistance levels, this is why using our Price action indicator and its price action filters is so important.

 
 

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Inside Bar #

Inside Bar

Inside bar is one of the most well known price action pattern and one that you definitely shouldn't ignore.

 

What is an Inside Bar?


The Inside Bar pattern consists of two candles. The second candle is smaller and within the first candle. The High of the second candle is lower than the high of the first candle and the low of the second candle is higher than the low of the first candle.
The first candle is often referred as the 'Mother bar'

 

Why are inside bars formed?

Inside bar patterns indicate a time of indecision or consolidation, the market is said to be resting or at a point of equilibrium.
Inside bars are often followed by big price movement (either as a continuation or a reversal).

 

How to trade Inside Bars?

Inside Bars can be traded as a reversal candlestick pattern when found at the top or bottom of a short term trend and validated by support or resistance levels.

inside-bar-at-zone

They can also be traded as a continuation pattern when inside bars are formed within an established trend.

inside-bar-trend

Inisde bar combo patterns are very popular, trading an inside bar which is also a Significant Pin Bar in a trendy market can be very profitable.

inside-bar-pin-bar

See how easy it is to track combo patterns with our Price action combo indicator.

 

Summary

Inside bars are good market sentiment indicators, but like all price action setups and patterns, they perform better when used in conjunction with a trend or key support and resistance levels, this is why using our Price Action Indicator and its price action filters is so important.

 

For more information on how to trade inside bars, take a look at this Price Action Course where Chris Capre shares rule based strategies and triggers to trade inside bars.

 

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Bullish Outside Vertical Bar (BUOVB) #

Bullish Outside Vertical Bar (BUOVB)

Traders love outside bar patterns and it's no surprise why they love the BUOVB pattern (Bullish Outside Vertical Bar).

 

What is a Bullish Outside Vertical Bar (BUOVB) pattern?

The Bullish Outside Vertical Bar pattern consists of two candles.
The second candlestick is a bullish candlestick.
The second candlestick has a Higher High and a Lower Low than the first candlestick.
The Close of the second candle should be in the last third of the bar.

 

Why are Bullish Outside Vertical Bar (BUOVB) patterns formed?

Like The Key Engulfing reversal pattern, the BUOVB represents a sudden shift in the order flow, which can often be a telling sign of a strong reversal coming.
It s a very good market sentiment indicators, notifying traders when more buyers have gotten in the market and that the market will most likely keep heading in the direction of that signal.

 

How to trade Bullish Outside Vertical Bar (BUOVB) patterns?

BUOVB patterns can be traded as a reversal candlestick pattern when found at the bottom of a short term trend and validated by support levels.

BUOVB zone

They can also be traded as a continuation pattern when BUOVB are formed within an established uptrend.

BUOVB trend

 

Where to Place your Entry, Stop Loss and Take Profit?

There are three ways to enter a Key Engulfing reversal trade. They all have Pros and cons and really depend on the trader as well as the market conditions.

 

Aggressive entry (Candle close Entry)

Engulfing-Close-Entry

Simply place a market entry.

 

Standard entry (Break of candle Entry)

Engulfing-Break-of-candle-Entry

Enter on a break of candle by placing a stop order just beyond the candle (1 or 2 pips).

 

Retracement Entry

Engulfing-Retrade-entry

Wait for the market to retrace to some extent before entering a trade.
Using retracement entry to get better Risk: Reward scenario can be very profitable but you might miss on a lot of trade if the market doesnt retrace.
Most traders always use the 50% retracement entry, but before deciding of a % figure you should always ask yourself what kind of price action environment are you in? Are we in a trend or a range? What are previous high and previous low? And then decide where the retracement entry would make the more sense (could be 33%, 60% or even 75%).
Going for a 50% retrace entry each time will get you a retail traders entry, not a professional one.

 

Stop loss

Engulfing-Stop-Loss

Stop loss is a level in the market that would need to be breached for you to be prove wrong and get you out of an investment.

A good rule of thumb is to place your stop loss few pips beyond the tail of the bar.

 

When to move Stop Loss

Once a trade has triggered and price has moved in your favor a bit, you can move your stop loss to break even.
I personally move my stop loss to break even once a candle has closed above the 1:1 target.

 

Take Profit

This is left to the trader’s discretion, however a good profit target is to use the next key level of resistance for a long trade, or the next key level of support for a short trade.
Traders should always aim for a return on investment higher than 2:1, if your Profit/Risk ratio is lower than 2:1 you may want to skip that trade or amend your Entry point in order to get a much better Profit/Risk ratio.

Our Position Size Calculator will allow you to decide if a trade is worth to take, when to enter it and what should be the right position sizing.

 

Summary

BUOVB patterns are great to trade, but like all price action setups and patterns, they perform better when used in conjunction with a trend or key support levels, this is why using our Price action indicator and its price action filters is so important.

 

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Bearish Outside Vertical Bar (BEOVB) #

Bearish Outside Vertical Bar (BEOVB)

Traders love outside bar patterns and it's no surprise why they love the BEOVB pattern (Bearish Outside Vertical Bar).

 

What is a Bearish Outside Vertical Bar (BEOVB) pattern?

The Bearish Outside Vertical Bar pattern consists of two candles.
The second candlestick is a bearish candlestick.
The second candlestick has a Higher High and a Lower Low than the first candlestick.
The Close of the second candle should be in the last third of the bar.

 

Why are Bearish Outside Vertical Bar (BEOVB) patterns formed?

Like The Key Engulfing reversal pattern, the BEOVB represents a sudden shift in the order flow, which can often be a telling sign of a strong reversal coming.
It s a very good market sentiment indicators, notifying traders when more sellers have gotten in the market and that the market will most likely keep heading in the direction of that signal.

 

How to trade Bearish Outside Vertical Bar (BEOVB) patterns?

BEOVB patterns can be traded as a reversal candlestick pattern when found at the top of a short term trend and validated by resistance levels.

BEOVB zone

They can also be traded as a continuation pattern when BEOVB are formed within an established downtrend.

BEOVB trend

BEOVB Entry Strategies

Where to put your entry?

Where to put your stop loss?

When to move your stop loss?

when to take your profit?

Same strategies as Bullish Outside Vertical Bar

 

Summary

BEOVB patterns are great to trade, but like all price action setups and patterns, they perform better when used in conjunction with a trend or key resistance levels, this is why using our Price action indicator and its price action filters is so important.

 

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Mother Bar Breakout #

Mother Bar Breakout

Mother Bar Breakout pattern is a follow up of the inside bar pattern and can be very profitable when traded as 'False-breakout', also known as ‘the fakey’.

 

What is a Mother Bar Breakout Pattern?


The Mother Bar Break out pattern consists of at least three candles.
A mother bar followed by one (or few) inside bar(s) and a breakout bar that has a high higher than the mother bar's high OR a low lower that the mother bar's low.

 

Why are Mother Bar Breakout Patterns formed?

Inside bar patterns indicate a time of indecision or consolidation, they are often followed by big price movement (either as a continuation or a reversal).
As its name indicates, the Mother Bar Breakout pattern breaks the range of the mother bar.

 

How to trade Mother Bar Breakout Patterns?

The best way to trade that pattern is to trade it when the 'Mother Bar Breakout pattern' acts as a 'False-breakout', also known as ‘the fakey’.

 

What is a Fakey?

When the price of the 'Mother Bar Breakout' get rejected and closes back within the range of the mother bar, it's called a 'Fakey' (sign that this break wasn't really a break).
The 'Fakey' setup is very powerful as the price often continue to move in opposite direction of the 'False-breakout'.

 

Examples of Fakey:

♦Inside bar pattern + Pin bar

fakey-pin-bar

♦Inside bar pattern + Key Engulfing Reversal

fakey-key-reversal

 

Summary

Mother Bar Breakout patterns are very powerful when used as a 'fakey' setup, but like all price action setups and patterns, they perform better when used in conjunction with a trend or key support and resistance levels, this is why using our Price action indicator and its price action filters is so important.

 

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Outside Bar Same Colour #

Outside Bar Same Colour

Traders love Continuation Candlestick Patterns such as the Outside Bar Same Colour pattern.

 

What is a an Outside Bar Same Colour?


The Outside Bar Same Colour pattern consists of two candles.

The two candles have the same colour.

The second candlestick has a Higher High and a Lower Low than the first candlestick.

 

Why are Outside Bar Same Colour patterns formed?

The big price activity range (higher high and lower low than the previous candlestick) suggests that both the Bears and the bulls were fighting hard for control of the market but the initial leaders managed to keep control and market will most likely keep heading in the same direction.

 

How to trade a Outside Bar Same Colour patterns?

Momentum trading is one of the most profitable methods of trading. Using the outside bar same colour pattern can help traders maximize their profits.
Most traders enter the trade few pips away from the close of the Outside bar and aim for a target 1 time the range of the outside bar same colour.

Outside Bar Same Colour

 

Summary

Using an Outside Bar same colour Strategy in Momentum Trading can be very profitable but like all price action setups and patterns, they perform better when used in conjunction with a trend or key support and resistance levels, this is why using our Price action indicator and its price action filters is so important.

 

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DBLHC (Double Low/ Higher Close) #

Double Low Higher Close (DBLHC)

Double Low Higher Close is another classic bullish reversal pattern loved by Price Action traders.

 

What are Double Low Higher Close (DBLHC) Patterns?

The DBLHC pattern consists of two candles.

The Lows of both candles need to be very close (within few pips).

The Close of the 2nd bar need to be Higher than the previous bar's high.

 

Why are Double Low Higher Close (DBLHC) Patterns formed?

Price tests support level twice but is rejected and cannot close below.
DBLHC pattern represents a sudden shift in the order flow, which can often be a telling sign of a short or long term uptrend.

 

How to trade Double Low Higher Close (DBLHC) patterns?

Double Low Higher Close can be traded as a reversal candlestick pattern when found at the bottom of a short term trend and validated by support levels.

DBLHC-zone

They can also be traded as a continuation pattern when a Double Low Higher close pattern is formed within an established uptrend.

DBLHC-trend

Where to Place your Entry, Stop Loss and Take Profit?

There are three ways to enter a Key Engulfing reversal trade. They all have Pros and cons and really depend on the trader as well as the market conditions.

Aggressive entry (Candle close Entry)

DBLHC-close-entry

Simply place a market entry.

Standard entry (Break of candle Entry)

DBLHC-break-entry

Enter on a break of candle by placing a stop order just beyond the candle (1 or 2 pips).

Retracement Entry

DBLHC-retrace-Entry

Wait for the market to retrace to some extent before entering a trade.
Using retracement entry to get better Risk: Reward scenario can be very profitable but you might miss on a lot of trade if the market doesnt retrace.
Most traders always use the 50% retracement entry, but before deciding of a % figure you should always ask yourself what kind of price action environment are you in? Are we in a trend or a range? What are previous high and previous low? And then decide where the retracement entry would make the more sense (could be 33%, 60% or even 75%).
Going for a 50% retrace entry each time will get you a retail traders entry, not a professional one.

Stop loss

DBLHC-stop

Stop loss is a level in the market that would need to be breached for you to be prove wrong and get you out of an investment.

A good rule of thumb is to place your stop loss few pips beyond the tail of the bar.

When to move Stop Loss

Once a trade has triggered and price has moved in your favor a bit, you can move your stop loss to break even.
I personally move my stop loss to break even once a candle has closed above the 1:1 target.

Take Profit

This is left to the trader’s discretion, however a good profit target is to use the next key level of resistance for a long trade, or the next key level of support for a short trade.
Traders should always aim for a return on investment higher than 2:1, if your Profit/Risk ratio is lower than 2:1 you may want to skip that trade or amend your Entry point in order to get a much better Profit/Risk ratio.

Our Position Size Calculator will allow you to decide if a trade is worth to take, when to enter it and what should be the right position sizing.

 

Summary

DBLHC patterns are great to trade, but like all price action setups and patterns, they perform better when used in conjunction with a trend or support levels, this is why using our Price action indicator and its price action filters is so important.

 

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DBHLC (Double High/ Lower Close) #

Double High Lower Close (DBHLC)

Double High Lower Close is another classic bearish reversal pattern loved by Price Action traders.

 

What are Double High Lower Close (DBHLC) Patterns?

The DBHLC pattern consists of two candles.

The Highs of both candles need to be very close (within few pips).

The Close of the 2nd bar need to be lower than the previous bar's low.

 

Why are Double High Lower Close (DBHLC) Patterns formed?

Price tests resistance level twice but is rejected and cannot close above.
DBHLC pattern represents a sudden shift in the order flow, which can often be a telling sign of a short or long term downtrend.

 

How to trade Double High Lower Close (DBHLC) patterns?

Double High Lower Close can be traded as a reversal candlestick pattern when found at the top of a short term trend and validated by resistance levels.

DBHLC zone

They can also be traded as a continuation pattern when a Double High Lower close pattern is formed within an established downtrend.

DBHLC-trend

DBHLC Entry Strategies

Where to put your entry?

Where to put your stop loss?

When to move your stop loss?

when to take your profit?

Same strategies as Double Low Higher Close

 

Summary

DBHLC patterns are great to trade, but like all price action setups and patterns, they perform better when used in conjunction with a trend or resistance levels, this is why using our Price action indicator and its price action filters is so important.

 

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Pin Bar Bottom #

Pin Bar Bottom

Trading reversal Significant Pin Bar such as Pin Bar Bottom with Support confirmation is one of the most profitable ways to trade.

 

What is a Pin Bar Bottom?

The Pin Bar Bottom is a Significant Pin Bar.
The Pin Bar Bottom appears in price downtrend. (Its low is lower than the previous 15 candles).

 

Why are Pin Bar Bottom patterns formed?

Pin Bar bottom patterns are formed when prices are tested and rejected at key support areas.

 

How to trade Pin Bar Bottom?

Pin Bar Bottom patterns are traded when found at the bottom of a trend and validated by key support levels.

pin-bar-bottom

 

Pin Bar Entry Strategies

There are three ways to enter a pin bar trade. They all have Pros and cons and really depend on the trader as well as the market conditions.

Aggressive entry (Pin Bar close Entry)

Pin bar-close-entry

Simply place a market entry.

 

Standard entry (Break of Pin Bar Nose Entry)

break-of-pin-bar-nose-entry

Enter on a break of the pin bar nose by placing a stop order just beyond the nose of the pin bar (1 or 2 pips).

 

Retracement Entry

Wait for the market to retrace to some extent before entering a trade.
Using retracement entry to get better Risk: Reward scenario can be very profitable but you might miss on a lot of trade if the market doesnt retrace.
Most traders always use the 50% retracement entry but before deciding of a % figure you should always ask yourself what kind of price action environment are you in? Are we in a trend or a range? What are previous high and previous low? And then decide where the retracement entry would make the more sense (could be 33%, 60% or even 75%).
Going for a 50% retrace entry each time will get you a retail traders entry, not a professional one.

 

Stop loss

Stop-loss

Stop loss is a level in the market that would need to be breached for you to be prove wrong and get you out of an investment.

A good rule of thumb is to place your stop loss few pips beyond the tail of the pin bar.

 

Pin Bar entry Example

 

*Aggressive entry (Pin Bar close Entry)

 

*Standard entry (Break of Pin Bar Nose Entry)

 

*Retracement Entry

As you can see with the previous examples, using different entry type can really increase your Risk: Reward Ratio.
Before entering a trade you should always determine a target and check if your R:R is worth placing that trade.

Our Position Size Calculator will allow you to decide if a trade is worth to take, when to enter it and what should be the right position sizing.

 

When to move stop loss

Once trade has triggered and price has moved in your favor a bit, you can move your stop loss to break even.
I personally move my stop loss to break even once a candle has closed above the 1:1 target.

 

Summary

Not all Pin Bar Bottom patterns are created equal, like all price action setups and patterns, they perform better when used in conjunction with a trend  or key support levels, this is why using our Price action indicator and its price action filters is so important.

 

Should you want to learn more about Pin Bar trading, then feel free to check out this Price Action Course whereby Chris Capre teaches quantitative methods for trading pin bars and discuss live setups all the time.

 

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Pin Bar Top #

Pin Bar Top

Trading reversal Significant Pin Bar such as Pin Bar Top with resistance confirmation is one of the most profitable ways to trade.

 

What is a Pin Bar Top?

The Pin Bar Top is a Significant Pin Bar.
The Pin Bar Top appears in price uptrend. (Its high is higher than the previous 15 candles).

 

Why are Pin Bar Top patterns formed?

Pin Bar Top patterns are formed when prices are tested and rejected.

 

How to trade Pin Bar Top?

Pin Bar Top patterns are traded when found at the top of a trend and validated by key resistance levels.

pin bar top

Pin Bar Entry Strategies

Where to put your entry?

Where to put your stop loss?

When to move your stop loss?

when to take your profit?

Same strategies as Pin Bar Bottom

 

Summary

Not all Pin Bar Top patterns are created equal, like all price action setups and patterns, they perform better when used in conjunction with a trend  or key resistance levels, this is why using our Price action indicator and its price action filters is so important.

 

Should you want to learn more about Pin Bar trading, then feel free to check out this Price Action Course whereby Chris Capre teaches quantitative methods for trading pin bars and discuss live setups all the time.

 

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Nose Engulfing (NE) #

Nose Engulfing

Nose engulfing is an other type of engulfing pattern that shouldn't be ignored.

 

What is a Nose Engulfing Pattern?


The Nose Bullish Engulfing pattern consists of two candles. The two candles have the same colour.
The Body of the second candle engulfs the Nose of the first candle.

 

Why are nose engulfing patterns formed?

This pattern indicates that the price is trending (short or long term trend).

 

How to trade nose engulfing patterns formed?

This pattern is mainly used by trend traders, they assume that the present direction of the stock will continue into the future. The trend trader enters into a long position when a stock is trending upward. Conversely, a short position is taken when the stock is in a down trend..

nose engulfing

 

Summary

Trading Nose Engulfing patterns can be very profitable but like all price action setups and patterns, they perform better when used in conjunction with a trend or key support and resistance levels, this is why using our Price action indicator and its price action filters is so important.

 

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Long Wick #

Long Wick

Long wick patterns can provide valuable trading information, they often indicate momentum switch.

 

What is a Long wick pattern?

The Long Wick pattern consists of one candlestick.
The focus is only on the wick size, the body size of the candlestick isn't important.
The size of the wick has to be significantly greater than the Average Range of the 14 previous candles.

 

What do we mean by Average Range (AR)?

A candlestick range is simply its High minus its Low.
A 14 candlesticks AR is the average of the range values for the last 14 candles.

 

Why are Long Wick patterns formed?

Like significant Pin bar patterns, Long Wick patterns are formed when prices are tested and rejected. Wicks are ‘rejection’ areas where the market simply rejected the prices of the wick.

 

How to trade Long Wick patterns?

Long Wick patterns can be traded as a reversal candlestick pattern when found at the top or bottom of a short term trend and validated by support or resistance levels.

long wick

 

Summary

Not all Long Wick patterns are created equal, like all price action setups and patterns, they perform better when used in conjunction with a trend or key support and resistance levels, this is why using our Price action indicator and its price action filters is so important.

 

Should you want to learn more about Long Wick trading, then feel free to check The Long Wick and Body Strategy (Mean Rejection) whereby Adam focuses on reversals at the end of corrective moves or at the end of strings.

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Big Shadow #

Big Shadow Pattern

The big shadow pattern is an Engulfing candle pattern with few more rules.

 

What is a Bearish Big Shadow Pattern?

Bearish Big Shadow


The Bearish Big Shadow pattern consists of two candles.
The second candlestick is a bearish candlestick.
The second candlestick has a Higher High and a Lower Low than the first candlestick.
The Close of the second candle should be in the last third of the bar.
There must be “room” to the left, meaning that the High of the second candlestick need to be higher than any of the previous 15 candles.
The range of the second candle (including wicks) has to be bigger than the last 8 candles.

 

What is a Bullish Big Shadow Pattern?

Bullish Big Shadow

The Bullish Big Shadow pattern consists of two candles.
The second candlestick is a bullish candlestick.
The second candlestick has a Higher High and a Lower Low than the first candlestick.
The Close of the second candle should be in the last third of the bar.
There must be “room” to the left, meaning that the Low of the second candlestick need to be lower than any of the previous 15 candles.
The range of the second candle (including wicks) has to be bigger than the last 8 candles.

 

Why are Big Shadow patterns formed?

Like The BEOVB (and BUOVB), the Big Shadow pattern represents a sudden shift in the order flow, which can often be a telling sign of a strong reversal coming.
It s a very good market sentiment indicators, notifying traders when more sellers/buyers have gotten in the market and that the market will most likely keep heading in the direction of that signal.

 

How to trade Big Shadow patterns?

When choosing a big-shadow trade, or any other reversal trade for that matter, look to the left of the pattern. If you see open space to the left, then perhaps the set-up will capture a critical turning point in the market.
Big Shadow patterns have to be traded when found at the top of a short term trend and validated by resistance levels.

 

Summary

Big Shadow patterns are great to trade, but like all price action setups and patterns, they perform better when used in conjunction with key resistance levels, this is why using our Price action tracker and its price action filters is so important.

 

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Double Inside Bar #

Double Inside Bar

Some traders call this pattern 'Breakout hunting' because they are are often followed by strong breakout

 

What are Double Inside Bar patterns?

double inside bar

The Double inside bar is a price action candles stick pattern where two inside bars form successively.

 

Why are double (triple and more) inside bars formed?

When double inside bars form, they indicate a lack of volatility, the market is said to be resting or at a point of equilibrium.
Double Inside bars are often followed by strong breakout.

 

How to trade Double Inside Bars?

Trading the double inside bar pattern is really straight forward. You are anticipating a breakout either up or down.
The double inside bar pattern breakout offers good trading opportunities (low risk/ high reward). The double inside bar pattern gives better results on higher time-frame charts (1hr and above).

 

Double (and more) inside Bar pattern Entry Strategies

As mentioned early, this pattern is called 'Breakout hunting' by many traders, so the entry type shouldn't surprise you.
We are anticipating a breakout of the first inside bar, to do so we place two pending stop orders at each end of the that first inside bar.

double-inside-bar-entries
Sell stop pending order should be few pips under the low of the first inside bar.
Buy stop pending order should be few pips above the high of the first inside bar.


Stop Loss

double-inside-bar-stop-loss
Your stop loss for a buy stop order should be few pips under the low of the first inside bar.
Your stop loss for a sell stop order should be few pips above the high of the first inside bar.


Take Profit


Trading double (or more) inside bars can be very rewarding, you should always aim for a reward at least 3 times bigger than your risk; This way this strategy would only need to work 25% of the time to make you profitable.

Our Position Size Calculator will allow you to decide if a trade is worth to take, when to enter it and what should be the right position sizing.


When to move your Stop Loss


Once trade has triggered and price has moved in your favor a bit, you can move your stop loss to break even.
I personally move my stop loss to break even once a candle has closed above the 1:1 target.

 

Summary

Double Inside bars are good to anticipate breakouts, but like all price action setups and patterns, they perform better when used in conjunction with a trend or key support and resistance levels, this is why using our Price Action Indicator and its price action filters is so important.

 

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