Technical Analysis

Candlestick patterns
 Use candlesticks with support and resistance, trend lines
 The human behavior in relation to money is always dominated by fear; greed, and hope
 If the close is above the open, we can say that the candlestick is bullish which means that the
market is rising in this period of time
 If the close is below the open, we can say that the candlestick is bearish which indicates that the
market is falling in this session

Candlesticks have different body sizes:

 if there is a candlestick in which the close is above the open with a long body, this indicates that
buyers are stronger
 if there is a bearish candlestick in which the open is above the close with a long body, this means
that the selling pressure controls the market
 Short and small bodies indicate a little buying or selling activity.

Candlestick shadows (tails)

 Candlesticks with long shadows show that trading action occurred well past the open and close.
 Candlesticks with short shadows indicate that most of the trading action was confined near the
open and close
 If a candlestick has a longer upper shadow, and short lower shadow, this means that buyers
flexed their muscles and bid price higher. But for one reason or another, sellers came in and
drove price back down to end the session back near its open price
 If candlestick has a long lower shadow and short upper shadow, this means that sellers flashed
their washboard abs and forced price lower. But for one reason or another buyer came in and
drove prices back up to end the session back near its’ open price.

The market structure

1. Trending markets
Trending markets are simply characterized by a repeating pattern of higher highs and higher low
in an up-trending market, and lower high and lower low in a down trending market.
(Bullish/Uptrend) The market is making series of higher highs and higher lows which indicates
that the market is up trending.
(Bearish/Downtrend) The market is making series of higher lows and lower low which indicate
an obvious downtrend.
To determine whether a market is trending or not, you have to use bigger time frames such the
4H, the daily or the weekly time frame. Never try to use smaller time frames to determine the
market structure.
How to trade trending markets
If you can identify a trending market, it will be easy for you to trade it, if it is a bullish market,
you will look for a buying opportunity, because you have to trade with the trend, and if the
market is bearish, you have to look for a selling opportunity.
 But the question is what is the right time to enter a trending market? Trending markets are
characterized by two important moves, the first move is called, the impulsive move, and the
second one is called the retracement move.
The market is making higher highs and higher lows which indicates a bullish market, if you see
this market you will think of buying. But as you can see the market is making two different
moves, the first move is an impulsive move, and the second one is a pullback or a retracement
move. (corrective move) Professional traders understand how trending markets move; they
always buy at the beginning of an impulsive move and take profits at the end of it. This is the
reason why the market makes an impulsive move in the direction of the trend and retraces
before it makes another impulsive move.
If you are aware of how trending markets move, you will know that the best place to buy is at
the beginning of an impulsive move, traders who buy an uptrend market at the beginning of a
retracement move, they got caught by professional traders, and they don’t understand why the
market hint their stop loss before moving in the predicted direction. See another example of a
bearish trend.
To predict the beginning of the impulsive move in a trending market, you have to master drawing
support and resistance levels.

Support and Resistance levels

Support and resistance are proven areas where buyers and sellers find some of equilibrium, they are
major turning points in the market. Support and resistance levels are formed when price reverses and
change direction, and price will often respect these support and resistance levels, in other words, they
tend to contain price movement until of course price breaks through them. In trending markets, support
and resistance are formed from swing points. in an uptrend the previous swing point acts as a support
level, and in a downtrend the old swing point acts as a resistance level.

Quite often when the market is on the move making new swing highs and lows, price will tend to respect
a linear level which is identified as a trend line. Bullish markets will tend to create a linear support level,
and bearish markets will form a linear resistance level.

How to draw trend lines?

To draw a quality trend line, you will need to find at least 2 minimum swing points, and simply connect
them with each other. The levels must be clear, don’t try to force a trend line

Don’t use smaller time frame to draw trend lines, use always the 4H and the daily time frames to find
obvious trend lines.

2. The Ranging Market

Ranging markets are pretty straight forward, they are often called sideways markets, because
their neutral nature makes them appear to drift to the right, horizontally.
When the market makes a series of higher highs and higher lows, we can say that the market is
trending up.
But when it stops making these consecutive peaks, we say that the market is ranging.
A ranging market moves in a horizontal form, where buyers and sellers just keep knocking price
back and forth between the support and the resistance level
 The difference between trending markets and ranging markets is that trending markets tend to
move by forming a pattern of higher high and higher lows in case of an uptrend, and higher low
and lower low in case of a downtrend.
But ranging markets tend to move horizontally between key support and resistance levels.
But ranging markets tend to move horizontally between key support and resistance levels.
The best buying and selling opportunities occur at key support and resistance levels
The first way to trade ranging markets is by waiting for price to approach support or resistance
level then you can buy at key support level and sell at key resistance level.
The second way of trading ranging markets is by waiting for the breakout from either the
support level or the resistance level
The second way of trading ranging markets is by waiting for the breakout from either the
support level or the resistance level. When the market is ranging, no one knows what is going to
happen, we don’t know who is going to be in control of the market, this is why you have to pay
attention to the boundaries, but when one of the players decide to take control of the market,
we will see a breakout of the support or the resistance level. The breakout means that the
ranging period is over, and the beginning of a new trend will take place...
The third way to trade ranging markets is to wait for a pullback after the breakout of the support
or the resistance level.
When you are trading ranging markets, always make sure that the market is worth trading, if you
feel like you can’t identify the boundaries (support and resistance). this is a clear indication of a
choppy market.
If a market is choppy, in my opinion, it is not worth trading, if you try to trade it, you will give
back your profits shortly after big winners, because markets often consolidate after making big
moves.

Time frames and top down analysis

As a price action trader, your primary time frame is the 1H, the 4H and the daily. Price action works on
bigger time frames, if you try to trade pin bars or engulfing bars on the 5-minute time frame, you will
lose your money, because there is lot of noise on smaller time frames, and the market will generate lot
of false signals because of the hard battle between the bears and bulls.

Besides, there is no successful price action trader who focuses on onetime frame to analyze his charts,
maybe you have heard of the term top and down analysis which means to begin with bigger time frames
to get the big picture, and then you switch to the smaller one to decide whether to buy or to sell the
market.

Through our top down analysis, we always start with the bigger time frame, and we look for to gather
the following information:

The most important support and resistance levels: these areas represent turning points in the market, if
you can identify them on the weekly chart, you will know what is going to happen when the price
approaches these levels on the 4h chart.

The market structure: the weekly analysis will help you identify if the market is trending up or down, or
it is ranging, or choppy market. In general, you will know what the big investors are doing. And you will
try to find a way to follow them on the smaller time frames using my price action strategies.
The previous candle: the last candle on the weekly chart is important, because it tells us what happens
during a week, and it provides us with valuable information about the future market move. When you
identify these points using the weekly chart, you can now move to the daily chart or the 4h chart and try
to gather information such as:

The market condition: what the market is doing on the 4h time frame, is it trending up or down, is it
ranging, or is it a choppy market.

What are the most important key levels on the 4h or the daily time frame: this could be support and
resistance, supply and demand areas, trend line

Price action signal: a candlestick patterns that will provide you with a signal to buy or short the market.
This could be a pin bar, an engulfing bar or an inside bar

Trading strategies and tactics

1. The pin bar candlestick pattern strategy
A pin bar is a chart candlestick, it is characterized by a very long tail that shows rejection and
indicates that the market will move in the opposite direction.
The area between the open and close is called the real body, typically all pin bars have a very
small real body and a long shadow. A Bullish pin bar is known for its lower wicks, and the bearish
one is characterized by long upper wicks, the color of the candlestick is not quite important,
however, bullish candles with white real body are more powerful than candles with a real black
body. On the other hand, a bearish pin bars with black real bodies are more important than the
ones with white real bodies.
if you identify a quality pin bar candle near a support key level in an uptrend market, this is a
powerful buying signal to take, you shouldn’t ignore it, but if the amount of money that buyers
put in this trade is less than the amount of money that sellers risk in the same trade, the market
will not go in your predicted direction.
The pin bar formed in bigger time frames such as the 4 hour or daily time frame should be taken
into consideration, because if you look at smaller time frames, you can easily spot lot of pin bar
signals, these setups should be ignored, because smaller time frames generate lot of false
signals.
The pin bar formed in line with the direction of the market is more powerful than the one which
is formed against the trend.
The most important areas to watch when trading pin bars are major key levels such as: support
and resistance, supply and demand zones, and moving averages. If you can identify a clear trend
that means that you know who is in control of the market.
If you are a beginner trader, i highly recommend you to stick with the trend, because pin bars
that occur in trending markets offer good trading opportunities with high risk/reward ratio.
When you master trading it with the rend, you can then move to trade range-bounds markets or
even counter-trends

Trading tactics
The aggressive entry option: this method consists of entering the market immediately after the pin bar
closes without waiting for a confirmation
The trend: The market was trending down, in this case we look for selling opportunities.

The level: In this chart we had a support level that becomes resistance.

The signal: A clear pin bar was formed after the retracement back to the resistance level.

2. The engulfing bar candlestick pattern

The engulfing bar pattern is one of the most powerful and profitable price action patterns,
knowing how to use it properly as an entry signal will tremendously improve your trading
profitability
This reversal candlestick pattern consists of two opposite colored bodies in which the second
body engulfs or covers entirely the first one
A bullish engulfing pattern forms at the end of a downtrend, it provides a clear signal that the
buying pressure has overwhelmed the selling pressure.
A bearish engulfing pattern occurs at the end of an uptrend, it is a top trend reversal indicator, it
shows that the bulls are no more in control of the market, and the price trend is likely to reverse.
According to Steve Nison, the father of modern candlestick charting, this candle must meet
three important criteria to be considered as a reversal pattern:
1-The market is in a clearly definable uptrend or downtrend
2-The engulfing candle comprises of two candlesticks, and the first body is entirely engulfed by
the second one.
3- The second real body is the opposite of the first real body

3. The inside bar candlestick pattern

An inside bar is two candlesticks, the first one is called the mother candle, it is big and large, and
the second one is smaller and it is located inside of the mother bar.
The inside bar is seen as a reversal pattern, because it indicates that the market trend is likely to
change especially when it is located at tops or bottoms.

Moving Averages
Momentum Oscillators