Ten lessons from my book: “The Ultimate Guide to Candlestick Chart Patterns”
A thread 🧵 👇
The larger the candle, the higher the volatility of price action, and the smaller a candle is, the tighter a trading range has become. Increasing candle size indicates expanding volatility, while candles getting smaller shows contracting volatility.
Hammers have a higher probability of being a valid reversal signal when found inside a chart trending downward.
After a single hammer candle forms during a downtrend, the next day’s candle should open inside the hammer price range, or higher, to confirm that a potential reversal higher did take place.
When using the inverted hammer as a reversal buy signal, waiting for the next candle to confirm a move higher can increase the odds of success.
A dragonfly doji can act as a signal for a potential reversal in a downtrend of price action if it happens near the lows in price action on a chart.
High trading volume in correlation with the candle pattern increases the probability of success with positions.
A spinning top candle is primarily used in technical analysis as a signal that a trend or range is changing. If the spinning top candle forms after a downtrend or range in a market’s price action, it can signal a good probability of a reversal higher.
A bullish harami candlestick pattern has better odds of working if it happens on a chart in an oversold area like a 30 RSI, or at a lower 2nd or 3rd deviation from the 20-day moving average.
Individual bullish candles on a chart illustrate buying pressure that drives prices higher from the open to the close. A bullish candle shows that buyers can hold higher prices until the close.
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6 Lessons most New Traders Learn Too Late in their Journey: Thread 🧵👇
Risk/Reward Ratio Is More Important Than Entry Signals.
Your potential maximum risk of loss versus your potential for maximum gain on any individual trade is more important than an entry signal.
An entry signal can just be an indication that there is a greater probability of one thing happening than another.
An entry signal without the context of position sizing, stop loss, trailing stop, and profit target is meaningless as it doesn’t define your risk/reward ratio.
Stop Losses Are More Important Than Profit Targets.
How much you can lose is more important than how much you can make. Big losses can cause you to be unprofitable and theoretical profits don’t matter as much as potential losses.
If you want to be a profitable trader you must remove the potential for big losses from your trading strategy.
Exit early when you are proven wrong at a key level that price shouldn’t go if the trade is going to be a winner.
U.S. government is monitoring a suspected Chinese surveillance balloon that has been moving over northern states over the past several days. (FN)
Pentagon spokesperson Brig. Gen. Pat Ryder said during a briefing on Thursday afternoon that the U.S. government has detected a high altitude surveillance balloon over the continental United States.
All your trades should end in one of four ways: ⬇️
1. A small win: You take a profitable exit, this is usually a short term trade.
2. A big win: You let a winning trade run when you’re on the right side of a trend. This is the biggest contributor to profitable trading as it increases the reward side of your risk/reward ratio. Trailing stops are the best tool for creating big winning trades. Let winners run.
1/12 Educate yourself on the basics of trading your market through reading online articles, books, videos, and eCourses to master the basic vocabulary.
If there are any holy grails in trading, these are it:
1/5 Big wins and small losses. With a 3:1 risk/reward ratio you can be a winning trader with a 33% win rate.
2/5 Never lose more than 1% of your total trading capital in a single trade. This brings your risk of ruin down to zero, & turns the volume of your emotions down to a manageable level. This risk management rule causes a trader to be disciplined in their position sizing & stops.