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GUIDED TRADING ACCOUNTS

SIMPLIFIED TRADING CONCEPTS – Lesson 3:

First let me make sure that you know what Bull and Bear mean:

The use of “bull” and “bear” to describe markets comes from the way the animals attack their opponents. A bull thrusts its horns up into the air while a bear swipes its paws down. These actions are metaphors for the movement of a market. If the trend is up, it’s a bull market. If the trend is down, it’s a bear market.

The Candlesticks

On pc’s the candlesticks button is visible. On smartphones, you usually need to flip your phone to landscape more, then the candlestick option will appear on the right side of the screen.

The simple version any trader knows is that when the chart forms 3 consecutive bullish candles, it means the market is going up, and if it shows 3 consecutive bearish candles, it means the market is going down.

But for those who want to understand the candlestick patters, here’s a simplified explanation, mostly inspired by WikiHow:

  1. Understand what the chart consists of. There are no calculations required to interpret Candlestick Charts. They are a simple visual aid representing price movements in a given time period. Each candlestick reveals four vital pieces of information:

    • the opening price, the closing price,
      Read Forex Candlestick Charts Step 1Bullet1.jpg
    • the highest price and the lowest price the fluctuations during the time period of the candle.
      Read Forex Candlestick Charts Step 1Bullet2.jpg
    • In much the same way as the familiar bar chart, a candle illustrates a given measure of time.
      Read Forex Candlestick Charts Step 1Bullet3.jpg
    • The advantage of candlesticks is that they clearly denote the relationship between the opening and closing prices.
     Read Forex Candlestick Charts Step 2.jpg
  2. Understand that candlesticks display the relationship between the open, high, low and closing prices. Interpretation of Candlestick Charts is based on the analysis of patterns. Currency traders predominantly use the relationship of the highs and lows of the candlewicks over a given time period. However, Candlestick Charts offer identifiable patterns that can be used to anticipate price movements.
  3. Learn the patterns. There are two types of candles: The Bullish Pattern Candle and the Bearish Pattern Candle:

    • A white (empty body) represents a Bullish Pattern Candle. It is used/denotes when prices open near the low price and close near the period’s high price. Meaning the price went UP.
      Read Forex Candlestick Charts Step 3Bullet1.jpg
    • A black (filled body) represents a Bearish Pattern Candle. It is used/signifies when prices open near the high price and close near the period’s low price. Meaning the price went DOWN.
      Read Forex Candlestick Charts Step 3Bullet2.jpg
  4. Understand how to read the Bullish Candlestick Formations:
    • If after a significant downward trend you see a Hammer appear, this shows a Bullish (upward) Pattern.
    • If the line occurs after a significant uptrend, it is called a Hanging Man. A small body and a long wick identify the Hammer. The body can be empty of filled in
      Read Forex Candlestick Charts Step 4Bullet1.jpg
    • If the first candle is a long, Bear (downward) candle, followed by a long Bull (upward) candle then the Pricing Line is a Bullish (upward) Pattern.
    • The Bull candle opens lower than the Bear’s low, but closes more than halfway above the middle of the Bear candle’s body.
      Read Forex Candlestick Charts Step 4Bullet2.jpg
    • If after a significant downtrend, a Bullish (upward) candle appears, it is showing a pattern strongly Bullish.
    • It may also serve as a reversal pattern. It occurs when a small Bearish candle is engulfed by a large Bullish candle.
      Read Forex Candlestick Charts Step 4Bullet3.jpg
    • The Morning Star (the “+” in the picture) is a Bullish Pattern signifying a potential bottom.
    • The star indicates a possible reversal and the Bullish candle confirms this. The Star can be a Bullish or Bearish candle.
      Read Forex Candlestick Charts Step 4Bullet4.jpg
    • In a Bullish Doji Star, the star indicates a reversal and a Doji indicates indecision. This pattern usually indicates a reversal following an indecisive period. You should wait for a confirmation before trading a Doji Star.
      Read Forex Candlestick Charts Step 4Bullet5.jpg
  5. Understand how to read the Bearish Candlestick Formations:
    • A Long Bearish Candle occurs when prices open near the high and close lower, near the low.
      Read Forex Candlestick Charts Step 5Bullet1.jpg
    • The Hanging Man pattern is Bearish if it occurs after a significant uptrend. If this pattern occurs after a significant downtrend, it is called a Hammer. A Hanging Man is identified by small candle bodies and a long wick below the bodies, and can be either Bearish or Bullish.
      Read Forex Candlestick Charts Step 5Bullet2.jpg
    • Dark Cloud Cover is a Bearish Pattern that is more significant if the second candle’s body is below the center of the previous candle’s body.
      Read Forex Candlestick Charts Step 5Bullet3.jpg
  6. Understand how to read Neutral Candlestick Formations.
    • Spinning Tops is a neutral pattern that occurs when the distance between the high and low, and the distance between the open and close, are relatively small.
      Read Forex Candlestick Charts Step 6Bullet1.jpg
    • A Doji candle implies indecision. The open and close are the same.
      Read Forex Candlestick Charts Step 6Bullet2.jpg
    • A Double Doji (two adjacent Doji candles) implies that a forceful move will follow a breakout from the current indecision.
      Read Forex Candlestick Charts Step 6Bullet3.jpg
    • The Harami pattern indicates a decrease in momentum. It occurs when a candle with a small body falls within the area of a larger body.
      Read Forex Candlestick Charts Step 6Bullet4.jpg
  7. Understand how to read the Reversal Candlestick Formations:
    • A Long-legged Doji often signifies a turning point. It occurs when the open and close are the same, and the range between the high and the low is relatively large.
      Read Forex Candlestick Charts Step 7Bullet1.jpg
    • The Dragonfly Doji also signifies a turning point. It occurs when the open and close are the same, and the low is significantly lower than the open, high and closing prices.
      Read Forex Candlestick Charts Step 7Bullet2.jpg
    • A Gravestone Doji occurs when the open, close, and low prices are the same, and the high is significantly higher than the open, close and low prices. It also signifies a turning point.
      Read Forex Candlestick Charts Step 7Bullet3.jpg
    • Stars indicate reversals. A Star is a candle with a small, real body that occurs after a candle with a much larger, real body where the real bodies do not overlap. The wicks may overlap.
      Read Forex Candlestick Charts Step 7Bullet4.jpg

    There’s nothing like trying out by yourself. And if ever you have a question, don’t hesitate to ask your Financial Architect or send us an email to services@atlantisfinancials.com.

    Happy Trading!


    Disclaimer: this blog was created to help beginner traders grasp some of the concepts of trading in a simplified way, inspired by other blogs or articles where traders have tried to do the same, and gathered here the way we saw useful to our clients. The concepts on this blog are in no way full-proof guaranteed successful trading or predictive methods, nor are they the only way one might trade successfully. Atlantis Financials and Charbel Khoury will not be held responsible for the results of the way the concepts in this blog are applied by readers and clients.