CandleStick Trend Strategy

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Trend Candlestick MT4 indicator – Free MT4 Indicator

The Trend Candlestick MT4 indicator is a trend following indicator that unlike any other indicators it gives you a clear visual picture of whether the trend is bullish or the trend is bearish. Based on Wikipedia definition trend following is “an investment or trading strategy which tries to take advantage of long, medium or short-term moves that seem to play out in various markets. Traders who employ a trend following strategy do not aim to forecast or predict specific price levels; they simply jump on the trend (when they perceived that a trend has established with their own peculiar reasons or rules) and ride it.”

The key factor that we have to keep in mind is that trend following doesn’t necessarily imply to predict the trend, but rather to try to ride the trend once it’s established and can be recognized. The Trend Candlestick MT4 indicator does precisely that, which is to identify the trend, but it does it so much earlier and usually a new trend is identified right from its inception. The Trend Candlestick MT4 indicator can be used to identify the short-term trends all the way up to the bigger trends and in this regard no matter if you’re a scalper or a long-term trader this indicator will keep you on the right side of the market. Going forward in this article you’ll learn more about the Trend Candlestick MT4 indicator and last but not least, you’ll learn a simple yet effective strategy.

The Trend Candlestick MT4 Indicator

Trend Candlestick MT4 Indicator – EURUSD 1 Hour Chart

In Figure 1 we have an example of how much clear the chart looks like when using the Trend Candlestick MT4 indicator. A lot of the noise that the standard candlestick price chart exhibit is eliminated and even though it’s not perfect it will improve your ability to spot the trend direction and last but not least to be on the right side of the market. In Figure 2 we can look at a comparison between the standard candlestick price chart and a chart with the Trend Candlestick MT4 indicator and by simply having a visual inspection of the chart, we can notice how much clearer the trend is when using the Trend Candlestick MT4 indicator.

Trend Candlestick MT4 Indicator vs Standard Candlestick Chart

Trend Candlestick MT4 Indicator Strategy

Like any other indicator the Trend Candlestick MT4 indicator is not perfect and in this regard before buying or selling, we want to make sure we’re trading in the direction of the daily trend because that’s the most powerful trend. No matter what time frame you use only take trades in the direction of the daily trend. Without further ado, here are the strategy rules:

  • Buy Signal: Check the daily chart and make sure we have a bullish trend (green candlestick). Downgrade to the 15 minute time frame and buy after the first green candle using a protective stop loss 10 pips below the green candle and take profit after the trend has changed from bullish (green candlestick) to bearish (purple candlestick).
  • Sell Signal: Check the daily chart and make sure we have a bearish trend (purple candlestick). Downgrade to the 15 minute time frame and sell after the first purple candle using a protective stop loss 10 pips above the purple candle and take profit after the trend has changed from bearish (purple candlestick) to bullish (green candlestick).

Trend Candlestick MT4 Indicator Trade Example

At the beginning of June 2020 (see Figure 3) we had the start of a new bullish trend on EUR/USD which means that if we are to follow the rules of our trend following strategy once we downgrade to the 15-minute chart we’re only going to take long positions.

Using the Trend Candlestick MT4 indicator on EURUSD Daily Chart

In Figure 4 we have the 15-minutes EUR/USD chart, we have a few trading opportunities that show the power of trading with the trend. Even when the market moves against us the loss is usually very minimal or you have the chance to break-even, while the profit potential is always much bigger which shows a positive asymmetrical risk-reward ratio.

The Trend Candlestick MT4 Indicator on 15 min Time Frame

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Trend Candlestick MT4 Indicator – Recommended Time Frames

Technically speaking, you can use this MT4 indicator for all time frames. However, the shorter the time frame, you will see more fluctuation and possibly more whipsaw which may cause small losses that can eat up your portfolio quickly. We recommend that you use higher time frames like the 4H for better consistency.

How to trade with Trend Candlestick Video Tutorial

How to trade with Trend Candlestick Video Tutorial

Ichimoku Kinko Hyo MT4 System Indicator Download

We have provided this powerful trend trading indicator to you at no cost. We humbly request for your help to spread the word by sharing on one of the social platforms below. To unlock the download link, you just need to share this page to help us achieve our goal of helping more traders out there.

Leave us a comment below to let us know your thoughts on this indicator. If you like this indicator, you might like see other indicators that we have carefully selected that will help you in your trading journey.

And if you can, you really should invest in a proven MT4 Expert Advisor to help you generate some profit on full autopilot. We highly recommend this powerful MT4 Expert Advisor.

Visit our Free MT4 Indicator Download page. We hope you have enjoyed this post as much as we have creating it. Good luck and thank you for your readership.

The 5 Most Powerful Candlestick Patterns

Candlestick charts are a technical tool that packs data for multiple time frames into single price bars. This makes them more useful than traditional open-high, low-close bars or simple lines that connect the dots of closing prices. Candlesticks build patterns that predict price direction once completed. Proper color coding adds depth to this colorful technical tool, which dates back to 18th-century Japanese rice traders.

Steve Nison brought candlestick patterns to the Western world in his popular 1991 book, “Japanese Candlestick Charting Techniques.”   Many traders can now identify dozens of these formations, which have colorful names like bearish dark cloud cover, evening star and three black crows. In addition, single bar patterns including the doji and hammer have been incorporated into dozens of long- and short-side trading strategies.

Key Takeaways

  • Candlestick patterns, which are technical trading tools, have been used for centuries to predict price direction.
  • There are various candlestick patterns used to determine price direction and momentum, including three line strike, two black gapping, three black crows, evening star, and abandoned baby.
  • However, it’s worth noting that many signals emitted by these candlestick patterns might not work reliably in the modern electronic environment.

Candlestick Pattern Reliability

Not all candlestick patterns work equally well. Their huge popularity has lowered reliability because they’ve been deconstructed by hedge funds and their algorithms. These well-funded players rely on lightning-speed execution to trade against retail investors and traditional fund managers who execute technical analysis strategies found in popular texts.

In other words, hedge fund managers use software to trap participants looking for high-odds bullish or bearish outcomes. However, reliable patterns continue to appear, allowing for short- and long-term profit opportunities.

Here are five candlestick patterns that perform exceptionally well as precursors of price direction and momentum. Each works within the context of surrounding price bars in predicting higher or lower prices. They are also time sensitive in two ways:

  1. they only work within the limitations of the chart being reviewed, whether intraday, daily, weekly or monthly.
  2. their potency decreases rapidly three to five bars after the pattern has completed.

Top 5 Candlestick Patterns

This analysis relies on the work of Thomas Bulkowski, who built performance rankings for candlestick patterns in his 2008 book, “Encyclopedia of Candlestick Charts.”   He offers statistics for two kinds of expected pattern outcomes:

  1. reversal – Candlestick reversal patterns predict a change in price direction
  2. continuation – while continuation patterns predict an extension in the current price direction.

In the following examples, the hollow white candlestick denotes a closing print higher than the opening print, while the black candlestick denotes a closing print lower than the opening print.

  • Three Line Strike

The bullish three line strike reversal pattern carves out three black candles within a downtrend.   Each bar posts a lower low and closes near the intrabar low. The fourth bar opens even lower but reverses in a wide-range outside bar that closes above the high of the first candle in the series. The opening print also marks the low of the fourth bar. According to Bulkowski, this reversal predicts higher prices with an 84% accuracy rate. 

  • Two Black Gapping

The bearish two black gapping continuation pattern appears after a notable top in an uptrend, with a gap down that yields two black bars posting lower lows.   This pattern predicts that the decline will continue to even lower lows, perhaps triggering a broader-scale downtrend. According to Bulkowski, this pattern predicts lower prices with a 68% accuracy rate. 

  • Three Black Crows

The bearish three black crows reversal pattern starts at or near the high of an uptrend, with three black bars posting lower lows that close near intrabar lows. This pattern predicts that the decline will continue to even lower lows, perhaps triggering a broader-scale downtrend. The most bearish version starts at a new high (point A on the chart) because it traps buyers entering momentum plays. According to Bulkowski, this pattern predicts lower prices with a 78% accuracy rate. 

  • Evening Star

The bearish evening star reversal pattern starts with a tall white bar that carries an uptrend to a new high.   The market gaps higher on the next bar, but fresh buyers fail to appear, yielding a narrow range candlestick. A gap down on the third bar completes the pattern, which predicts that the decline will continue to even lower lows, perhaps triggering a broader-scale downtrend. According to Bulkowski, this pattern predicts lower prices with a 72% accuracy rate. 

  • Abandoned Baby

The bullish abandoned baby reversal pattern appears at the low of a downtrend, after a series of black candles print lower lows.   The market gaps lower on the next bar, but fresh sellers fail to appear, yielding a narrow range doji candlestick with opening and closing prints at the same price. A bullish gap on the third bar completes the pattern, which predicts that the recovery will continue to even higher highs, perhaps triggering a broader-scale uptrend. According to Bulkowski, this pattern predicts higher prices with a 70% accuracy rate. 

The Bottom Line

Candlestick patterns capture the attention of market players, but many reversal and continuation signals emitted by these patterns don’t work reliably in the modern electronic environment. Fortunately, statistics by Thomas Bulkowski show unusual accuracy for a narrow selection of these patterns, offering traders actionable buy and sell signals.

Putting the insights gained from looking at candlestick patterns to use and investing in an asset based on them would require a brokerage account. To save some research time, Investopedia has put together a list of the best online brokers so you can find the right broker for your investment needs.

How to Use Candlestick Patterns to Start Winning More Trades

If you can learn how to trade candlestick patterns, it is a powerful weapon for your trading results. Each and every candle is providing traders with information. It is conveying a message how to read and interpret the current status quo of price action. Being able to judge the communications of the market via the comprehension of candles provides a dangerous edge to all traders.

Once you learn how to read candlestick patterns you will be able to properly find out the following stages of market behavior.

  • Bullish Candlestick Patterns
  • Bearish Candlestick Patterns
  • Neutral Candlestick Patterns

Each candle indicates via its internal composition which side of the market is in control – or whether no side is in charge. When viewing the candle, a Forex trader can understand whether the bears or bulls managed that particular bar. By doing so, a trader can make estimations about the strength of a rally or fall – or the lack of it – and use that for their trading purposes. Candlestick patterns for day trading can be a great strategy to employ if you have time to spend in the markets each day.
The candles can be used to judge:

  • Trend continuation
  • Impulsive continuation
  • End of trend
  • bearish candlestick patterns
  • End of correction
  • Breakouts
  • Failed to break out
  • Failed breakout failure
  • Pullback
  • Bounce

CANDLESTICK PATTERNS BASICS
Let us start with the candlestick patterns basics on how to calculate and recognize what the candle values mean. Each candle has an open, high, low and close.
The proper way to analyze a candle is to compare the open, high, low and close values and the relationship between them.
a) First of all, the close value minus the open value will determine whether the candle was bullish or bearish, or indecisive (equal values). This information will explain whether the candle is +20 pips or -100 pips and this is called the body of the candle.
b) Secondly, the difference between the high and close/open and the difference between the low and close/open will determine the size of the wicks on both ends (could be 0 (zero) as well), and this is called the wick of the candle.
c) When subtracting the high from the low, that is how you calculate a total candle value. When dividing the size of the candle body/wick by the entire candle length, a ratio is computed. This ratio will provide information regarding the balance of the power in that particular candle.

WHO’S IN CONTROL?
Now let’s discuss what information the ratio and balance of power within a candle conveys to us: who’s controlling the market?
1) Power from one side: this usually happens when a candle has no or little wick. The wick should be none to small (preferably less than 10-20% of the candle body). The wick is only necessary for closes near highs in bullish cases and closes near lows in bearish cases.

  1. A close near the high/low (h/l) within +/- 0-10%: total control
  2. A close near the h/l within +/-10-20%: good control
  3. A close near the h/l within +/-20-30%: some control possible (depends on context)
  4. A close near the h/l within +/-30-40%: questionable/no control (depends on context)
  5. A close near the h/l within +/-40+%: no control from one side

2) Loss of control from one side: this happens when the candle has one big or decent size wick. If the wick is on top, then the Bulls lost control during the candle. If the wick is on the bottom, then the Bears lost control during the candle. The wick percentage of the total candle size shows how much control was given away during that price struggle:

  1. A wick of +/- 0-20% indicates little loss of control
  2. A wick of +/-20-40% indicates some loss of control
  3. A wick of +/- 40-60% indicates loss of control
  4. A wick of more than 60% is a major loss of control

3) Loss of / no control from both sides: this happens when the candle has two wicks on both sides. There is no clear winner, and the bulls and bears remain in balance. The open and close are often equal to each other or almost equal to each other (small body), which indicates indecision.

KEY ASPECTS
Besides the fact whether a candle has a bullish or bearish net gain, whether the close is near the h/l, whether there is a wick, which side(s) there is a wick, what percentage of the candle is the wick and body, it is also important to look at the size of the candle.

A big sized candle will have more value than a small sized candle. Of course, this depends on the time frame. A candle size of 40 pips is a massive sized candle for the 1-hour chart but not for the daily (small). Usually, the larger the candle, the more strength, and information the candle will give, and that helps make a trading decision.

The timeframe itself is of course also necessary. The higher the time frame, the more valuable the information can become because the candle is providing an understanding of the balance of power of a longer period. For example, the effect of a primary wick on the daily chart indicates massive loss of control during the entire day, which has more importance than a wick on a 15-minute chart (bear/Bulls losing control for only 15 min).

When has the candlestick patterns printed is also another factor of analysis?

A daily candle printed on Sunday is usually small and provides no information. A 1-hour candle written at 1 am GMT on the EURUSD with a seven pip body also has little value.

Last but not least, the candle needs to be closed before an assessment can be made on the candle itself. When a candle is open, it can close anywhere it wants to. It is certainly possible to make an analysis of that candle, but when the candle is open, a trader is trading/analyzing a lower time frame.

CANDLESTICK PATTERNS In Action

As explained in the previous paragraphs, each candle provides a valued source of information whether the market remains/changes to bullish, bearish or indecisive. Some of the candlesticks, however, do provide more value than others. These candlesticks have various names because they are of more importance than regular and “normal” candles.
Certain candlestick patterns consist of 1 candle. Other candlestick patterns need two candles to be complete, or even up to 3 candles to form a combination formation.

CANDLESTICK PATTERNS IN MARKET STRUCTURE

Candlesticks are the building blocks of what will later become a swing high or swing low. The swing or swing low in turn can either be impulsive / momentum OR corrective / consolidation. The candlestick patterns usually occur at the bottom or top of these swing highs and swing lows, but can also provide information of continuation. Also, candlestick patterns often indicate the beginning and end of momentum and corrections.

The various swing highs and swing lows that are labeled as momentum and correction can, in turn, be the building blocks of a trend channel, trend line, and chart pattern.

CANDLESTICK PATTERNS VIDEO TRAINING

I have posted this video if you are interested in becoming a more advanced candlestick trader.

CANDLESTICK PATTERNS IN STRATEGIES

Candlesticks can be used for trading Forex strategies. How these candles are used will differ from strategy to strategy, and from trader to trader. Some Forex traders even opt to trade solely based on the information provided by candlesticks. They make their analysis and trading decisions/management based on the candlestick patterns. An example could be for instance trading pin bars.

Other traders use candlesticks as supportive information. They seek confirmation of their analysis via candlestick patterns. For example, traders could be waiting for a bounce at a trend line by analyzing candles. This strategy means that traders use candles as part of a broader strategy and use it as confluence. Price action signals at major support and resistance, for instance, is a method that capitalizes on candlestick patterns in combination with other technical analysis.

Last but not least, some traders may choose not to use candlestick patterns because they prefer other concepts. All traders need to find a balance in their tools, indicators, and analysis.

Do you use Japanese candlestick patterns for analysis and trade management? If yes, is there any particular candlestick patterns you like most? If not, why not? Let us know down below!

Thanks for sharing this candlestick patterns training article and Good Trading!

Please leave a comment below if you have any questions about candlestick patterns !

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