Look at this image over here and let me ask you, do you know which is my favorite Candlestick Pattern Is it a Morning Star the piercing pattern? the engulfing pattern. Well, let me tell you right, my favorite Candlestick pattern is actually this the hammer. Now some of you might be thinking oh, right now I know I just need to spot the hammer on a chart and then I Click. Buy.

No, not quite yet my friend, Because if you were to do that, you will find that you you'll get a lot of unnecessary losses, right? So we don't just want to blindly buy a hammer when we see on the chart. So likewise, we don't just marry any random girl that we see on the street. We have to do a little bit of research and I'll explain to you later what I look for before I trade the hammer but before we get to that right? I Need to make sure that we're all on the same page, right? Because some people they don't even understand what a hammer means, right? So let me explain to you what a hammer means. A hammer is a bullish reversal Candlestick pattern.

All right. Why is that a reversal? Because you can see over here. this and this price point is the opening price. This over here is the closing price and this is the high of the time period.

So let's say you spot this hammer on a daily time frame. Let's put here daily. You will see that this refers to the high of the day and this over here is the low of the day So if you think about this right, the story of a hammer goes something like this: The market opened at this price point and then the sellers took control and pushed the price down lower near these lows of the day at the maximum pessimism. Right during the day, the buyers somehow find the motivation the Courage the strength to push the sellers right all the way up higher and finally closing near the highs of the day.

So you can see that initially during the early part of the day the sellers were in control driving the price down lower and eventually the buyers step in and push the price up higher. So it's kind of like Avengers right? If you watch Avengers end game, you remember that you know Captain America is all alone facing Thanos Army So at the point of time, right? it's full of pessimism. I Thought man, that guy's gonna get killed right? Then what happens right? There's this, Uh, the Birdman and his friend called Sam right flown in. The next thing you know the portal starts to open up.

Then black panther turn up Wakanda forever. They fought right after which the good guys you know they win the war. So same thing over here right? The bias. Initially they were getting suppressed by the sellers, but eventually they overcome and kind of like win the battle.

right? In this case it's uh in in this in this uh reference. Yeah, so the opposite of a hammer is kind of like what we call a shooting star pattern. so this is just the inverse. A shooting star pattern is where the price open.

at this price point, it closes at this price. This is the high. If you look at this on the daily time frame, this is the high of the day and this is the low of the day, right? So it's just the opposite. When the market open, the buyers quickly pushed the price up higher right? Eventually the seller say Ah that's as high as you'll go in any Drive the price down lower.

eventually closing near the lows of the day over here. So it's like you know you, uh, didn't study for your exam right? And then you got back your results. Man I got an eight despite not starting Why? all over the moon, right? filled with you know, happiness And then a short while later realized man is not A as in A for a good grade, but A for absent and then the whole world come crashing down right. So kind of like this shooting star pattern over here.

And of course, the hammer and the shooting star pattern are not the only two reversal Candlestick patterns out there. Another similar version of the hammer is the bullish engulfing pattern. It's a very similar story, just that instead of expressing it as a single candle, you're expressing it as two candles. So the first candle over here, you can see the sellers are in control closing near the lows of the day, and the second candle is where the buyers stepped in and pushed the price to close near the highs of the day over here.

So this this is the closing price for the first day. This is the closing price of the second. As we can can see right, it's like a hammer, right? Sellers in control buyers step in, push the price up higher, close near the highs of the day. So likewise, the bearish engulfing pattern.

Similar story. All right. I Don't think you need me to go through this or I'll just do it quickly, right? So initially right Buy is closed near the highest of the day, the next day, the sellers to control and push the price and finally closing near the lows of the day. So now moving on, let's talk about how not to trade Candlestick patterns because this is the mistake that I would say many three Traders make.

Okay, so let me share with you an example. So a new Trader right? They might look at this chart and then they say oh man, look at this big nice juicy green candle right? This is a sign of reversal. after all, look at the price. It broke above resistance.

It's a breakout. It's time to buy. and if you were to do that right, here's what happens next. You can see that this Market pretty much collapsed down.

Lower it. over here. it collapsed down lower and you will likely have gotten stopped up after your trade. Okay, another example this over here.

You can see that this Market is in an uptrend and then we have this consecutive red candles in a row. And to most Traders they think oh man right now look how bearish this is. You know the size of the red candle is getting bigger and bigger. The price it has broke below.

support the trend is now down. It's time to shot shot. And if you were to do that right, if you were to shop this market sell this. Market Here's what happens next.

The market pretty much rarely up higher over here. Okay, so the G's of this is very simple: how not to trade Candlestick Is this: You don't want to base your buying or selling these decisions based on the color of the Candlestick. Just because it's a big green candle doesn't mean it's a buy. Just because it's a big red candle doesn't mean it's a cell.

There's more to it. And I'll explain to you right now how to trade Candlestick patterns. And by the way, if you are enjoying this training so far, smash the Thumbs Up Button If not hit subscribe, go Do it. I'm waiting.

First thing you want to pay attention to is to know what is the trend. What? By knowing what is the trend. right, you will be able to answer this question. What do you do? Do you look for buying opportunities Or selling opportunities? So let me give an example.

Look at this chart over here and let me ask you, Is this Market in an uptrend or a downtrend? The way to Define trend is very simple. In an uptrend, you will see a series of higher high, higher, high, higher high high Yeah, high and higher low, higher low, higher, low, higher low. So if you look from left to right, if you really can't draw these higher highs and higher lows, you look from left all the way to the right if the market is going up higher. We call this an uptrend simple.

And when the market is in an uptrend, we look for what do we look for buying opportunities right? We look for buying opportunities. And by the way, don't get me wrong, just because the market is in an uptrend doesn't mean we immediately, you know, click the buy button. No, we look for other things as well. But at least at this stage, right.

We know what is our bias to look for buying opportunities or shorting opportunities? Next one, have a look at this chart. Let me ask you, what is the trend? The trend is in a downtrend? Why is that? Because if you gain reference from left to right, you can see that the market is hitting down progressively over time. And if you look at your higher highs and higher lows or rather, in this case, lower highs, lower highs, and lower highs and lower low, lower, low low, it's progressively going down lower over time. So this means that you want to look for selling opportunities in such a market condition.

So as you know, right, you don't want to buy just because the market is in an uptrend or sell just because in the downtrend. So the question now is you know where exactly do you buy and sell on the chart And this brings us to number two, the area of value. This right simply helps you answer the question. where do you buy or sell? So let me explain.

So if you look at this chart again, over here this one, over here, you can see that the market is in an uptrend okay, series of high highs and higher lows. Now the question is, you know where exactly do you buy on the chart? Where are the opportunities to buy? That's a great question and we can utilize Concepts like support and resistance. So support is very simple. It's an area on your chart where buying pressure could step in to push the price higher.

So for example, this is an area of support. Why is this an area of support? Because if you look at this chart previously, this was resistance. Price broke above resistance. Then it came back.

Retest at support. go up higher retail support, go up, buy your retail support support and any broke out a higher. So again this is an area of support. Another area of support that you can see is this one over here.

Okay, why is this an area of support Again previous resistance, price broke out, retest and support breaks out and now possibly coming to retest this area of support So If you are looking at this chart and you are looking for buying opportunities, I would want you to pay attention to these two areas on your chat because these are areas where you could look for opportunities to get long right? So this is an example of area of value. Now let's do the inverse. In this case, this is a downtrend. So where do we look for selling opportunities? Where on a chart do we want to find no opportunities to sell? So in this case, what I'm saying is this one over here.

This is an area of value. so notice how this is previous support support price breaks below support and become resistance. That's that once sleep down lower, retest a second time, hit down even lower and now it's back at this area. once again right at this area of resistance and that's how I would draw this area of value another one I'm seeing over here.

Is this possibly this one here? Okay and here's the thing right when I draw my support resistance on the chart when I draw my area of value I Try not to have too many levels on the chart because let's face it right, let me just give you an example. Let's say we have this one over here and maybe let's say this one over here. Okay, there's no need to draw. Let's say you know over over here as well over here.

So why is that? Because imagine this: if the price do go up higher and re-test back around this level over here you look at this chart. Does this look still look bearish to you? No. this in fact might be the start of a new uptrend. So this is why I try not to have too many, uh, support resistance on the chart I Really draw the two most recent ones because those are the ones that are most important if the price has broke right the two most recent let's say resistance.

in this case, probably the trend has already changed and I want to look for buying opportunities like no longer shorting opportunities. Now you might be thinking okay Reena so I wait for the market to be in a downtrend comes into resistance in Excel Well not quite yet my friend. because the 30 13 we're gonna look for is our entry trigger and this is where our Candlestick patterns knowledge that you have learned earlier comes into play. because entry trigger what it does is to answer the question when to buy or sell when right? So you can see over here.

I Like to bowl. The first word earlier was you know what where and now is when when to buy or sell. So again, using entry triggers, you can use the patterns you've learned earlier like the hammer. Why is the hammer significant? Because again, if you recall right, Hammer tells you that the buyers they are temporarily in control right earlier, the price was pushed down lower than the buyers to control and push the price up higher, closing near the highs of the day.

So if you have, you know trading the direction of trend trading from an area of value. and then if this Hammer is an entry trigger, you will greatly put the odds in your favor for that trade. Likewise, the inverse is true for shooting star pattern. Imagine in the market is in a downtrend.

it comes to an area of resistance. You get a shooting star pattern again, right? The odds are better for you, right? as the market could possibly you know, head down lower. And of course, the hammer and shooting star pattern are not the only two patterns you've learned. also the bullish engulfing pattern and the bearish engulfing pattern.

As much as I would like to say, this is a Holy Grail where you have 100 winning rate. Unfortunately, that's not the case right? because this trading strategy that I'm sharing with you who will have losses as well. So to contain our losses, we must know right? our exits. So for exits right, very simple.

It seeks to answer the question when to exit your trade. So when we deal with exits, there are two parts. Number one exit where you're wrong AKA your stop loss and the other one is exit if you are right, otherwise known as your target profit. So let's talk about the first one exit if you are wrong.

So for me, right when it comes to stop loss, right, exiting when I'm wrong I Like to set my stop loss at a very logical level. the stop loss right must be at that level where it invalidates my trading setup. So let me give you an example. Let's say the market is in an uptrend.

Okay, and he retests back this area of support and then maybe bounce up higher over here and then and over. Here is a signal to buy. Okay, let's say over here it's a buy you buy over here. Now let me ask you, where will you set your stop loss? Will you set your stop loss at? Let's say for example, over here A Over here.

B Over here. C you already said that a B or C take five seconds to think about this Ready one to five. Okay, the answer is this right. I would set my stop loss right.

Okay, right? Why not? Let's go through each option first, right? So first. one: A A is a good. It's not a good level to set your stop loss. Why is that is? because you can imagine if the market makes any slight reversal or slight blip lower, you will get started out of your trade.

And the funny thing is that when you get stopped out of your trade, support is not even broken. Support is still pretty much intact Because A is over here, right? You'll get stopped out of the trade while support is still holding up. So that's not a good level to set your stop loss. Now what about B So if the price reaches to B right, you can see that it has retest support, but has support been broken well at that point in time B right? Support is still not broken because your stop loss is smacked at support.

And remember, support is an area on your chart, not the level. So just because the price has retested the level at B doesn't mean that you know, uh, support is broken. So if you ask me right, I will want to set my stop loss at C because imagine if the price comes down lower and touch. C At this point, clearly Support over here is broken and when support is broken, my trading setup is invalidated and I want to get out of the trade.

Okay, okay, so little I'll share with you an example on how to set your stop loss. but the concept behind it right is uh, what? I've shared with you earlier. This is the concept. the idea behind setting my stop loss.

Now what about exit if you are right? So again, let's say for example, let's say the market is in A Range It goes up, comes down, goes up, comes down and let's say bounce up you buy over here. Let's say you buy this price point. Okay, now let me ask you where do you want to take profit? Do you want to take profit And let's say uh, A B or C where do you want to take profits? So let's look at this one by one right? What about let's see what about a I Wouldn't want to be taking profits at A Why Is that? It's because there is no A is kind of like in the middle of nowhere. If I take my profits over here at A right I'm kind of like leaving profits on the table because it's pretty much in no man's land.

Okay, what about B right? I Want and want to actually take profits at B Why do I want to take profits at B is because I know that B right is just before an area of resistance. So if I set my target profit level at B just before an area of resistance I have a good chance of you know, exiting this trade for a profit and also right respecting this price structure. Over here, the area of resistance where sellers might come in and push the price down lower. Now what about C Why don't I want to take profit and see? very simple, right? Yeah, Yes, C will give me more profit potential, but if you think about this right for the price to reach C it has to break above this area of resistance and I'm actually making the market work harder to give me a profit.

and whenever I make the market work harder for me, it makes me suffer. So I don't want that. So usually when it comes to taking profit I like to take it at B just before you know the key price structure on the chart. So let's do a quick recap.

Shall we? To what we've just learned number one we talk about: Don't trade Candlestick Patterns in isolation. This means that you know if the candle is green doesn't mean it's a buy. When it's red, doesn't mean it's a cell. I share with you a very simple formula.

Alert first is to look at the trend, then the area of value. The trend tells you what to do, whether to look for buying opportunities or selling opportunities. The area of value tells you where to buy right to buy, maybe a support or resistance. The entry trigger you learn Candlestick patterns like the hammer, shooting star Etc And then we talk about exits.

Right where to exit if you are wrong And where to exit if you're right. So now I want to share with you some examples. You can see how all these Concepts right come together. Okay, this first example is the chart of a Swiss franc against Japanese Yen the daily time frame.

So first thing is the trend. Let me ask you what is the trend. Is it up or down? You can see the market is in an uptrend. good.

Next one, where is the area of value. Okay, you can pause this video and you know visually identify the area of value. But for me, here's where I'll draw it over. Here is one and possibly another one over here.

Okay, these are the two area of value on my chart right? So why is did I plot this two levels? Because this is previous resistance Price Breakout Retail says support previous resistance Price Breakout Retest Support So Now price would possibly commit to this area of value or this one over here. Now why don't I draw area of value? Let's say over here. or maybe over here. Well, because at this level and this level I don't want to be buying at the price point because if the market do reach that level, the market is probably already in the downtrend.

I Don't want to buy in the downtrend, How many you want to look for selling opportunities in a downtrend? So no point drawing those two levels because if the price do get to it, the trend would have already reverse and I'm no longer you know looking for buying opportunities. So now that we have spot right there's a two area of value the two block blue box over here. Next thing we are looking for a valid entry trigger to go. Long as you know you've learned things like your Hammer your bullish engulfing pattern.

So let's see what happens next. So in this case the market came into our area of value. But do we have an entry trigger to go long? Let's find out. Yep, we have it right in the market for my hammer and this tells us that hey, you know the buyers are now temporarily in control.

So if you understand the story behind this you can see that the market overall is in an uptrend. The market make a pullback towards this area of value. An area of value is where buying pressures could step in and push the price higher and you got Clues right that buyers are stepping in because the market opened over here. try to break down lower couldn't but reverse eventually enclosed near the highs of the day.

So this tells you that buyers are stepping in. So what you can do is do go long right on the next candle open. So let's say next candle open over here right? This will be our how entry price at the opening price. so let's just say we change this to Green to signify our entry.

What about stop loss? So for stop loss I Like to. If you remember, we like to set it a distance away from price structure a point where it will invalidate our trading setup. So you can see that this is an area of support. So if the price breaks below this area of support, we want to be out of the trade.

So where at which exact price point right do we know we want to get off the trade? So one way to kind of like quantify that answer is to actually use the ATR indicator right? So I'll just show you every two range. Click on this. Okay, I'll just uh, delete this one. I'll use this one right.

The settings I use this uh, 20 period I mean the 20 period and SM you click. Ok, so what you'll do is to find out what is the ATR value. Okay, so you can see that right now the ATR value is 1.221 What this tells you is that over the last 20 trading days, right? the market moves an average of 1.2 to 1. uh, dollars per day.

Okay, and the way to kind of like know where exactly to set your stop losses to find out. The low of this candle at minus 1.221 So the low of this candle right is actually let me just bring my cursor here is 137.15 Okay, so 137.15 So I'll just take one, three, seven, 0.15 this is the low over here and I minus off with 180r which is 1.221 And what does it give me I'm just going to pull out my trusty calculator and I get 0.221 I'm just going to run up to make things easier. One three, Five Point nine, three. Okay, so this will be my stop loss level.

So what I'm going to do is do bring out this line over here. I'll just change this to rate to signify stop loss and it's at 135.93 Okay, and there you have it. This is my stop loss level. and if you recall, what about Target Where do we want to exit if the market moves in our favor? So usually I like to set my target just before the recent swing High just before resistance And from what I'm seeing on the chart right, this is an area where sellers might come in to push the price lower.

So just put this. let's just change this to Blue and to signify our Target profit. So now for those of you who want to, you know, be a little bit more uh, or rather want to know what is your risk to reward on the trade. you can actually use this tool.

Just click on this long position. Since you're looking at a long trade, click on this and green is your entry price. I Just press the tool only over here. Shift this one over here.

to your stop loss level which is the raid one and this top one over here which is the blue one which is your Target and it'll tell you what is your potential risk to reward on this particular trade. So I'm just going to adjust it slightly to be a bit more accurate. Okay, so you can see that your potential risk to reward on this trade is 1.13 as shown over here. This means that you're risking a dollar to potentially make one dollar and 13 cents.

and since, uh, this is a Cherry Picked shot, All right, you can see that the market yeah eventually did reach our Target over here and you have exited with a profit. Now let me share with you an advanced strategy right using this Concepts that you've learned earlier. So this Advanced strategy will help you identify a low risk trading opportunities, but at the same time I offer you a more favorable risk to reward on your trade. So this means you can possibly know risk a dollar to make four dollars or more.

So here's how it works, right? So first thing first again, what is the trend in this market condition? So you can see Market is in a downtrend downtrend. We look for selling opportunities. So where is the area of value on the chart? So in this case, the area of value is what I'm seeing over here I will draw it somewhere about here. this is the area of value that I'm looking at.

So if you recall right earlier, the basic strategy is where you look for a price rejection or a reversal Candlestick pattern at this area of value. But to take things a step further, this Advanced strategy you can actually go down to a lower time frame right to fine tune your entry by doing that right. Your stop loss right is smaller. It's Tighter and this means that you get a more favorable risk to reward on the trade.

So in this case, let's go down to the eight hour time frame. So the eight hour time frame. This is the area of value that I've highlighted earlier. the same one.

What we're looking for now is again the same thing. price rejection at this high. So we're looking for the price to come up higher and give us a bearish price. Rejection could be something like a shooting star pattern and then from here we will enter our trade.

So imagine this right? If you're entering on an eight-hour time frame, you're going to be much earlier compared to someone on the day daily time frame. And when you're trading on eight hour time frame, your stop loss is going to be tighter. smaller because the range movements of this Market on this time frame is smaller compared to the range movement on a daily timeframe. I Mean it's it's logical right? You know the price movement on the five minutes time frame is much smaller compared to a weekly time frame.

So same thing the eight hour time frame. The price movement is going to be smaller compared to the Daily time frame. So let's see what happens next. So in this case Market tried to Rally up higher.

Okay, and over here we have a bearish price rejection looking something like a shooting star bet and so what we can do is to go shot on the next candle open right? So let's say we call this one over here. Let's say our entry prices over here. I'll just change this to Green to signify, uh, the entry price. Okay, I'm not going to do it here I'll just remove this box so it's quite irritating.

So I'm not going to do the ATR calculation for stop loss because you already know how to do it right? So I'll just you know in in Singapore Lingual. quickly agaga, we just estimate right. So I'll estimate the stop loss. The 180 stop loss will be about here.

Okay, so and by the way, right when you set your 180r stop loss right, the ATR value will be on. Based on eight hour time frame, you can reference the daily time frame if you want, right? but I usually use the eight hour time frame. So I get a nice tight stop loss. And as for Target, you can see that over here.

we have a few levels right where buyers might step in and to push the price higher. so the first one I'll say this is one possible area worth paying attention to I'll put this to Blue Okay, and since right you've this is the first. Uh, this is a target right? And since right, you've seen that on the daily time frame this Market is in a downtrend. There's actually a good possibility ability that this Market could also retest this low over here.

So for Target I would also have another Target right just before this area or swing low. Okay, so if you go back to the eight hour time frame, it looks something like that. So at this point now we have multiple targets right? This green is our entry. This rate is our stop loss and this blue Here we call it Tp1 our first Target and this one is our second target.

Okay, so in this case that you can see that instead of you know using the daily time frame to fine tune your to enter your trade You're Now using a lower time frame to enter your trades earlier and thereby you know improving your overall risk to reward on the trade. So in this case right again admit this is a cherry pick chart and you can see the price right would have you know hit your first Target over here and and let's say once the price has hit your first Target there are times where it just simply you know starts to move against you and then hit your stop loss. And if it does happen right, don't worry because this will probably just be a break-even trade because imagine if you buy I mean you shot. Let's say uh one lot right of this this Market you would exit 0.5 Lord 0.5 Lord at this first Target profit in the bank and your remaining 0.5 lot.

Let's say the market reaches your stop loss over here right? So 0.5 vlog this one over here is a loss. This one here is a target. So overall this trade will probably be a small profit or a break even. Yeah, so that's kind of like a uh how multiple targets work So we can see that in this case the market did eventually hit down lower and you know, hit our second target as well.

So overall I mean as I've said, it's a cherry big shot This trick would have you know worked pretty beautifully in your favor. But bear in mind right there are times where you know the market could also you know reverse against you, hit your stop loss and that's the reality of trading. Okay so this is a live trade that I actually took and I want to walk you through my thought process step by step using the concepts that you have just learned. So again when I look at this chart the first thing I asked myself what is the trend Market is it an uptrend Then I asked myself where is the area of value So over here I spotted this area of value this area of Support over here.

So at this price point right when the market uh at this juncture I was actually looking for buying opportunities I was looking for the price to retest this area of support right and then get rejected to close back above it. So I can look for an entry to go long. After all this Market is an uptrend right? This was my my top process right trading in the direction of the trend. so as you can see the market then head down lower.

Big Bearish candle. This doesn't really frighten me because I've seen many times where there's a strong big bearish candle coming to support you might think oh man, somebody's gonna break me to just pay attention to it. Next thing you know the market revers up higher and then you got caught right? got caught by the market so this is what happened right then makes Market break below. support right people thought man, this Market is going to it's going to crack right? And then we have this reversal candle over here looking something like a bullish engulfing pattern.

Okay, so at this price point I I went long on the next candle. Uh, open. Okay, so I'm just going to show you I've just removed this first. this was my entry.

Okay, I'll change this to green and for stop loss. it's again using the ATR concept. I shared with you was about here at opponent time somewhere about here. Okay, just change this to rate.

Now what about my target, right? So this one I was actually having a Target just before this area of resistance. somewhere about here was my target you in blue. Okay, so let's see what happens next. So in this case, the market pretty much hit my stop loss very quickly.

So the point I'm sharing this with you is that this is not the Holy Grail I think I've repeated this you know a number of times already. So again, take what I've shared with you, go and test it out on your own. you know. Demo testing, forward testing whatever works for you, right to make it work for you.

Because as you've seen right, this concept can be tweaked right to your needs. Whether you want to go with a basic version Advanced Version: trading across a different time frames like maybe the 15 minutes in one hour, it's entirely up to you. And since we are on the topic of you know Candlestick Patterns my favorite Candlestick pattern. If you want to learn more about it, you can go down to my website trading with Rainer.com Over here just scroll down over here at the bottom.

We have this free and monster guide to Candlestick Pattern where we share with Ira how you can actually use it to better time your entries and exists right? This guide is completely free. Just click this orange button, enter your email over here and I'll send it to your email address for free, Right? So again, go ahead and do it right now. I'll put the link somewhere below this video and I will talk to you soon.