Hey hey, what's up my friend, so in today's episode I want to share with you the top 3 beginner's mistake to avoid when trading candlestick patterns. So here's the thing right, I'm sure you can agree that candlestick patterns is one of the most popular way. I to to plot the prices on your chart, but just because it's popular doesn't mean that most traders are doing it the right way. So let me share with you the top three mistakes that I see.

Traders make number one when traders they look at the chair and is a huge bullish momentum right now, waiting to the self put himself, Oh rain, I look up bullish. The market is right, no market is going to the moon right, let's buy and when they buy. What's the problem with this? Well, when you buy after the prices meet such a huge price movement higher, you will face a problem and that problem is where do I put my stop-loss? There is no price structure, there's no support. There is no swing low.

Then you can reference against to send your stop-loss. So what do you do? Well, you arbitrary set a random stop-loss on your chart. Maybe 20 people - 50 pips, whatever you feel like it now. Here's the thing right.

The market doesn't care where your stop-loss is right. After you made such a huge advancement in price, it needs to take a breather. It needs to pause, it needs to retrace, it needs to pull back or even reverse, and when that happens, guess what happened to your stop-loss catching gone. Just like ding gone just gone right, someone's gon na take profit right where your stop losses, then you get stopped out of your tree.

Ok, so that's the first mistake too. To avoid when you see the price, when you see the market may a huge move. Alright, that's a strong signal to you that you shouldn't be entering the trade it's too late, because that's where the energy has really expanded. Ok, it's too late to enter, don't chase the market right so avoid that number two.

The second mistake I see traders make is that they trade this. You know candlestick patterns in isolation, for example, they look at a chart. Oh a bullish, hammer time to buy your it's a hammer. After all the textbook the causes see, then, if you see a hammer, it means the buyers are in control.

I should buy and you go along well, what's the problem with this again, a hammer simply tells you that at a point in time momentarily the buyers are in control. Yes, but it doesn't mean that the market has a high probability of going up. Why? Because you still must look at the current market condition the context of the market what's going on, for example, if, for the last 200 candles, the market is in a downtrend right, the prices steadily steadily been making lower highs and lower lows. What are the odds right off there? One hammer winning right against the last two hundred candles winning against the downtrend.

That's in place right now. Well, the odds are pretty slim right. If you, if you, if you think about this, it's like having a toyota vios moving here and having a train, let's make this like there's a train moving at 300 km/h and the vos is going at 50 kilometres per hour. What's gon na happen, the Train of freaking in the car man, the car will crash and burn, and that's what happened right if you buy a hammer that tiny weenie hammer in an existing downtrend, you should expect to you know, get stopped out of your trade consistently And that's my point right: you don't wan na be trading Candlestick patterns in isolation.

They are not signals, they are not setups. They just simply tell you right historically, what has happened over the last one candle and that's it I'll share more with you later on how you should treat candlestick patterns, but first don't trade them in isolation, and that mistake is this. Is that traders that me included right, I am guilty of this - is that you memorize all these different candlestick patterns out there right? Let's be honest, there are so many variations of it, possibly hundreds of them hammer shooting star her ami abandoned baby and engulfing pattern, a whatsoever, and if you were to memorize all these patterns, the name of it, the meaning of it. Your question, but unless you have you know photogenic memory, I don't have fright so I I was very frustrated for for a long time.

So here's the thing I don't memorize candlestick patterns instead also some. What is the market trying to tell you, and all you need to do - is ask yourself these two questions, just two questions and you can understand any candlestick patterns. Then you come across. Let me share with you what these two questions are.

First question is this: where did the price close relative to the range? You know a candlestick pattern has a high and a low, so ask yourself whether the price close relative to the range T close near the highs? Well, that means that they know the buyers are temporarily in control. Did it close near the middle of the range no meymeys undies my buyers and sellers there? I know pretty much on equal footing, order the price close near the lows where the sellers are in control. So that's the first question. The second question you ask yourself is: what's the size of the candlestick pattern relative to the earlier ones and the reason you're asking yourself, this question is because you want to see if there's any conviction behind the move.

Again, for example, let's say you spot a hammer on the chart. Okay, but let's say this hammer right: the size of this hammer is about the same size as the last five candles or the range of this hammer. The size is pretty similar or even slightly smaller. Then what is telling you that is that there isn't likely any conviction behind the hammer, but on the other hand, let's say you have another hammer, that's been forming this time around the hammer.

The size of this hammer is two times three times larger than the preceding candles. This tells you that this is clearly a strong price rejection. There is conviction behind this move all right and that's how you read candlestick patterns right. You want to analyze why? What's the size of this pattern relative to the earlier candles as well? Okay, so these are the top three mistakes to avoid when you're trading candlestick patterns, so moving on, you might be thinking okay, we know.

So how do I treat candlestick pattern? So I'm gon na give you a very simple formula to treat candlestick patterns and if you want more details right, you can just a google my YouTube videos later on just search for our I'll tell you later. But for now let me share with you this thing called the Mae formula. All right me is spelled as ma e. Some of you might be familiar with it.

Some of you is the first time, so let me explain so what does Mae formula stands for me? Stems from the mod market structure, I'm a to area of value number three: the entry trigger and number four exits. So, let's talk about market structure. If the market is in an uptrend, what you'll be doing, selling no first-known are you gon na be buying right market? Is in an uptrend, the path of least visitors resistance is towards the upside, so you wan na look for buying opportunities, but by now you should know that, just because the market is in an uptrend doesn't mean you. You want to blind me by right.

You're to buy you're to buy at a good price level and then area of value. So that brings us to the second point, the area of value. So where is an area of value? The many ways to define is you can use moving average? You can use support, you can use trendline trend channels right, but generally like to use support, right trend, lights or even moving average. So we wait for the price to come to an area of support, but this is an area of value.

So once the price has come to an area of support, they want mix well, we have no idea where the support will hole or break. So that's bringing us to the top point. The entry trigger we're looking for a candlestick pattern. The bullish candlestick pattern right to show us the buyers are stepping in to push the price higher.

This could be in the form of a hammer could be in the form of bullish, engulfing pattern, etc. So that's the third thing. The fourth thing right exits right just because you enter a trade, you have to have a plan of getting off your trip. So where do you put your stop-loss? Well, you can put your stop-loss.

Let's say: 180 are below the lows of hammer. That's one! That's possible! Then, how do you exit if the price moves in your favor? What if this is going to be a winning trade? How do you exit your winners? Well, we can look to take profit at the nearest swing high and resist it and that's in essence right what the main formula is all about, I know, might be hard to visualize right now, so just go to my youtube channel or I just Google may formula Trading with Rainer and you will see a video, a pop-up, and I explain all this in much more greater detail said and really it will break down this concept right into a step-by-step manner. So with that said right, I have come to the end of this video. A quick recap: number one don't buy our after market does make a huge move, because that's where it's likely to make a pullback or reversal number two don't trick.

Candlestick patterns in isolation doesn't work that way. Number three: okay, don't memorize candlestick patterns right, just ask yourself the two questions I shared with you earlier: where did the price close relative to the range and what's the science of the candlestick pattern relative to the earlier candles? Okay and finally, we spoke about am a formula briefly for more details, just search on youtube and you will get a complete training on it. So that's it. I wish you good luck and good trading, and I will talk to you soon.

You.