The topic of today's episode is how to read stock charts for day trading. Now it's not exclusive to day trading, you could just as easily apply what I'm going to share with you today for swing trading or short term or even long term investing. But day traders especially lean on stock charts for our understanding of where to buy and where to sell. So if you're clicking this video and you're wanting to learn more about stock charts, it's probably because you're taking a pretty active interest in being in the market.

And in contrast to like a line chart that just shows the line kind of going up and down which you might see on like Cnbc when they're talking about a stock. The type of charts that active traders use are called candlestick charts and we use these types of charts because they provide a lot more information and each individual candlestick the form that it takes actually communicates a strong market sentiment which an active trader like myself can interpret and help me understand what I think the stock is going to do next. because ultimately the best trader is the trader who can predict the future. So we use as many tools as we can to try to predict the future.

And one of the things that's really cool is that the language of these stock charts I'm going to be sharing with you during this series. These This is a language that provides very clear buy and sell indicators. So if you're trading and you're not utilizing candlestick charts, there's a there's a whole world of the market that you're totally missing. These are they're clear buy and sell indicators that you're just not seeing at all.

So a seasoned trader most likely has their own internal library or sort of database in a way of these different chart patterns and how when you see this chart pattern what you can expect the stock will do next. So we see a very particular pattern and we can expect the stock. following that pattern is going to break out to the upside and this gives us a real edge as a trainer. So that's why technical analysis is so important and we're going to start high level with an understanding of the anatomy of a candlestick, and then through this series I'm going to break down the different candlestick shapes, the market sentiment that they communicate, and then we're going to get into multi-candlestick patterns and I'm going to share with you a few of my favorite patterns that for me I rely on heavily in my trading every single day.

And for those who don't know, my name is Ross Cameron and I am a full-time day trader. last five years I've made over 10 million dollars in gross profit and I say that not to brag and not to have you think that my results are typical, but because I want you to know that I actually know what I'm talking about here. So this is you want to make sure you're learning from someone who's not just like talking theory and stuff like that. I actually put to work Everything I'm going to share with you here on a daily basis.

Okay, so let's jump into the whiteboard to break down what a candlestick is. So let me draw a candlestick here. This is, uh, just the type of candlestick you'd see on any ordinary chart. And let me break down what this is telling us.

This candlestick? Right here. Regardless of whether we're looking at a daily chart, a five-minute chart, or a one-minute chart, this candlestick is telling us four pieces of information: The open, the close, the high and the low. Now a green candlestick is gonna. It could have the exact same shape, but it's going to be colored green because it opened low and closed high.

So we need to have our candlesticks colored whether they're going up or going down. Because although the low and the high are the same, the open and the close are different depending on whether it's going up or going down. So this is a candlestick right here that's already communicating some degree of indecision. The stock in this period went up, dropped down, but then closed.

In this case, a little lower than the open. In this case, it's sort of the inverse. It went up, it pulled back, and then it closed a little higher than the open. So this specific candlestick shape is communicating some market sentiment now all by itself.

Maybe not a big message. The message really comes as we start to see multi-candlestic formations, or as we start to see very particular types of candles at the end of a big move to the upside. and that could be an indicator of a reversal about to happen. Now let's talk about time frames.

So this candlestick chart. This could be any time frame. Let me actually show you real quick on my, uh, on my computer, this is a daily chart. So this is all of these candlesticks over the period of nearly a year, Over a year of price action.

So this is how this chart is created. Each individual day is its own candle. Now, we could switch the time frame up here in the top left from daily to five minute. and when we change it to a five minute, now we're just looking at today's price action.

And then this is after hours in pre-market And this is yesterday's price action. So now we're seeing a very, very narrow view of the stock, which would be helpful for day trading. We can go in even further down to a one minute chart. And now we're just looking at the last couple of hours of price action.

And so a trader who's actively trading a stock that's moving quickly and it's very volatile will be relying on one minute and five minute time frames. But let's switch back to the whiteboard for a second. and let me just show you something that's kind of interesting. So I'm going to draw a candlestick here.

and let's see. So if I drew the candle just like that, we know that this is the open and that's the close. Now this candle would communicate a much different message if it has a lower, uh, candle wick or a low that's way down here. Like that.

That would tell us that Wow. This stock sold off all the way during that period, but then came all the way back up and even closed strong. That's pretty bullish, or if it had a huge upper candle wick, it would tell us it squeezed way up there, but then came back down. That's a little bearish, but let's just say it's a little bit more.

Kind of just average. All right. So we've got a candle that's a little bit more like that. And let's say that this is a five minute chart.

Okay, so if this is a five minute chart, five minutes, Five minutes Here, this is a five minute candle. This represents five minutes of time. So what most traders will have when they're when they're trading is they'll have a five minute chart, a one minute chart, and a daily. And this will be on one computer screen right there.

And usually a computer screen will have two sort of sets of charts like this. So this then this will be the other stock here. So a trader would probably watch two stocks at once. So this one might be.

You know the S P 500 and this would be United States Oil Fund just for instance. So if you had this five minute candle, this is a five minute candle. Okay, so let's think about that. What does that mean? It means literally that there are five minutes inside that candle.

That means if we're looking at a one minute chart right here, there are five one minute candles that created this one five minute candle. So what would those five minute candles look like Those five individual candles look like? Well, they opened and initially the stock squeezes up. It squeezes up quite a lot because we know it opened down here and it hit a high of uh way up here. Now it's possible that it dropped in one candle all the way down to there and that of course would have been actually a red candle.

Which is fine. So it sells off all the way down there and then it bounces back up and closes up here. Now of course the candle could have had different a different shape it could have. This candle could have been, Um, just for instance.

It could have initially gone. Uh, it could have initially. Well, let's see. so let's just finish that like this.

Uh, so then the close, let's just say is like right here. Okay, so that's the close that was the open and then we have our upper high and our lower low. So we put those pieces together right. And that's how the candlestick gets its shape.

Now that's one way that five one-minute candles could go into a five-minute candle like that the other way. Alternatively is that right at the open. it sold off, it dipped down, and then it surged right back up here, over one, maybe two candles, and then it pulled back a little bit and closed. Kind of like here.

So again, we would still have basically the same pieces of information. We have the open, we have the close, we have the high, and we have the low, And so that creates the candlestick body. And I think what this is a good example of here is how this is a very different one-minute chart from this one here. So if you're looking just at a five-minute chart, right, you're looking just at the five-minute chart as we might look at over here.

You could actually be misled to think that the stock is really strong because you're not seeing the price action that occurred within the shorter time frame. Just as if you're looking at a daily chart. you might not recognize what happened truly on an intraday basis. So it is important to look for multi what we call multi-time frame alignment.

That's when you have both a strong five minute, a strong one minute, and a strong daily chart. That's sort of the perfect storm when it comes to technical analysis when you have that multi-time frame alignment. so real quick. Uh, right down in the description.

If you look at the description, this video, you'll see a link to download my Pdf. This is a Pdf of my Micro Pullback Strategy, which is a multi candlestick strategy that is one of my favorites and I trade it almost every single day. Everything we're talking about in this series is about the language of technical analysis. so it's really not strategy based as much as it is really communicating to you the language of the financial market.

So you better understand these red lights and green lights as they're forming so you can develop that awareness and hopefully start to execute when you see these red lights and green lights these by cell indicators as they're communicated through these patterns. So I think a good complement to this technical analysis course is for you guys to check out the download below where you can download the Pdf of my small account Micro Pullback Strategy: So the micro pullback strategy is when we have and this is almost always on the one minute time frame. We have a stock that's squeezed up and then it has a momentary pullback and that momentary pullback is all we need to base risk with the opportunity to get in at this little spot. So this for me is one of the most consistent patterns that I trade almost every single day.

It's called the micro Pullback and I encourage you guys to check out the download. It's in the description right below and you can go through that download as you continue to watch the remaining episodes as part of this series on technical analysis, because this will help you with understanding the strategy that you're going to apply to this new language that you're learning. So I'm going to get rid of this here. So what we're ultimately looking for when we're when we're watching charts is we're looking for these patterns to begin forming.

So what we're going to talk about as we get into the next episode of this multi-part series on technical analysis are different candlestick formations. So let's just say for instance, we have a stock that opens right here like this: A little teeny body like this opens. It hits a high way up here, but then it closes right here and is therefore a red candle. That candle communicates a huge amount of indecision in the market.

What if we had a candle that opened right here, dropped down, came back up, and closed right about here? Well, that would communicate something else entirely. What if we had a candle that opened and closed at exactly the same price, but had a big upper candle wick and a long lower candle wick? These are three different types of candles that represent extreme levels of indecision, and we're going to talk about those in the next episode of Technical Analysis, where we talk about the Doji candlestick. so check out that episode right there to continue on to part two of this Technical Analysis series.