Welcome to the IGD basic candlestick course
Before leaning advance price action first we need to learn the language market uses to communicate with you
A candlestick is one of the most important and simplest ways to read charts like a pro
A candlestick alone can give you insights like this (How high was the price at this time? How low was the price at this point? Where did it start? Where did it end?) It gives you all the answers that are required for you to understand the language of the market
What is a candlestick?
A candlestick is a way of displaying information about an asset’s price movement. Candlestick charts are one of the most popular components of technical analysis, enabling traders to interpret
price information quickly and from just a few price bars. - This article focuses on a daily chart, wherein each candlestick details a single day’s trading. It has
three basic features:
The body, which represents the open-to-close range
The wick, or shadow, that indicates the intra-day high and low
The color, which reveals the direction of market movement – a green (or white) body indicates a price increase, while a red (or black) body shows a price decrease
Over time individual traders use trading patterns as a direction reversal or resistance levels. There are a great many candlestick patterns that indicate an opportunity within a market – some provide
insights like where is the most pressure is it on the sell side or the buy side? The reaction is important and candlestick helps us monitor that.
Before you start trading, it’s important to familiarise yourself with the basics of candlestick patterns and how they can inform your decisions.
Pattern Number 1: Three Candle Swing
The three-candle swing has been around for quite a long time and many traders use this as a confirmation
The reason why it happens is sellers usually add sell limits on red candle highs that pushes the market down but If the market has already broken above that means there was not enough selling which causes buyers to take the control but there’s one question which is does that 3 candle swing always work? The answer to that is No it does not always work but its a good insight to have which many traders use as a confirmation but not a strategy
The key rules to follow when market 3 candle swing is monitor previous candle high if trend is bullish and monitor low if trend is bearish. For example lets say there’s a green candle in bull trend now what we look for is candle to break above the previous candle once it do that we will wait for new candle form and break below the breakout candle once it happen then we can consider that as a 3 candle swing
Pattern Number 2: The Liquidity Candle
Talking from experience liquidity candle has been the most effective pattern I ever used in the crypto and forex market but the winrate in crypto is relatively higher than forex
The method to be able to mark the best liquidity candle is observing where market has created the biggest wick candle the example is given in the screenshot if we find a candle like that in the bear move the chances are high that this liquidity candle will be filled in the next couple of hours we can even use this like we use gap up gap down openings as we know most gaps gets filled.
This pattern works similarly.
Now there are some corrections to this that using a liquidity candle alone will get traders manipulated for the most time and they always end up as a loser in the market so the simple fix to this is don’t rely on one single confirmation tool combining different tools and then take a trade.
This way the chances of losing gets lower significantly
The market is all about probability if you are using the right tools and have a basic knowledge that you use with discipline its really not that difficult to be consistent
Pattern Number 3: Hammer Pattern
A hammer shows that although there were selling pressures during the day, ultimately a strong buying pressure drove the price back up. The colour of the body can vary, but green hammers indicate a stronger bull market than red hammers.
Inverse hammer
A similarly bullish pattern is the inverted hammer. The only difference being that the upper wick is long, while the lower wick is short.
It indicates a buying pressure, followed by a selling pressure that was not strong enough to drive the market price down. The inverse hammer suggests that buyers will soon have control of the market.
Pattern Number 4: Shooting Star
The shooting star is the same shape as the inverted hammer, but is formed in an uptrend: it has a small lower body, and a long upper wick.
Usually, the market will gap slightly higher on opening and rally to an intra-day high before closing at a price just above the open – like a star falling to the ground.
Pattern Number 5: Evening Star
The evening star is a three-candlestick pattern that is the equivalent of the bullish morning star. It is formed of a short candle sandwiched between a long green candle and a large red candlestick.
It indicates the reversal of an uptrend, and is particularly strong when the third candlestick erases the gains of the first candle.
Pattern Number 6: Three White Soldiers
The three white soldiers pattern occurs over three days. It consists of consecutive long green (or white) candles with small wicks, which open and close progressively higher than the previous day.
It is a very strong bullish signal that occurs after a downtrend, and shows a steady advance of buying pressure.
Pattern Number 7: Three black crows
The three black crows candlestick pattern comprises three consecutive long red candles with short or non-existent wicks. Each session opens at a similar price to the previous day, but selling pressures push the price lower and lower with each close.
Traders interpret this pattern as the start of a bearish downtrend, as the sellers have overtaken the buyers during three successive trading days.
In short three black crows are bearish versions of three white soldiers and both work the same way but in different directions.
When these pattern forms we can consider that as a bearish or bullish confirmation because it leaves an fvg behind and usually in the crypto market price tends to either fill those gaps or reject from bearish or bullish fvg but now the question is how can we know that is this market going to fill those fvg or its just going to reject from it so the answer is simple observe what happened in that fvg before. If the fvg has been tested before like 1 time chances are high that this gotten weaker but still I would not consider that enough for me to project a fvg fill but if the fvg has been tested 2 times before now that’s the confirmation that gives me the idea yes now there’s a very high probability that this time it might fill the fvg and then I can plan my trade around it