CANDLESTICK PATTERNS

1.The engulfing bar

2. The morning Star

 3. The evening Star

4. Hammer (the pinbar)

5. The shooting Star (bearish pinbar)

6. The Harami Pa ern (the inside bar)

7. Tweezers
 THE MARKET STRUCTURE
Trending markets

How to trade trending markets:

Buy at the beginning of an impulsive Buy at the beginning of an impulsive

move in an uptrend and take profits move in an downtrend and take profits
at the end of it at the end of it

Support and Resistance levels

Major turning points in the market.
 Trendlines
To draw, 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.

Always use bigger timeframes (4H, daily, weekly) to find obvious trend lines.

The Ranging Market

Often called sideways markets

Buy at key support level and sell at key resistance level.

To trade, wait for the breakout from either the support level or the resistance level.
Range boundaries are often overshot, giving the illusion a breakout is occurring, this can
be very deceptive, and it does trap a lot of traders who positioned into the breakout.

T trade ranging markets is to wait for a pullback after the breakout of the support or the
resistance level.

But Pullbacks don’t always occur after every breakout, when it occurs, its a great
opportunity with a good risk to reward ratio.
 The Ranging Market
These have no clear directions, when you open your chart, and you find a lot of noise,
you can’t even decide if the market is ranging, or trending.

Time frames and top down analysis

Primary time frame is the 1H, the 4H and the daily.
Price action works on bigger time frames.
To trade the 4h chart, you have to look at the weekly chart first, and then the daily chart,
if the weekly and the daily charts analysis align with the 4h chart, you can then take trading
decision.

Always start with the bigger me frame, and gather the following informa on:
The most important support and resistance levels: present turning points in market.
Identify them on weekly time frame.
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.
The previous candle: the last candle on the weekly chart is important, it tells what
happens during a week, provides valuable information about the future market move.
A er iden fying these points using the weekly chart, move to daily or 4h chart
and gather informa on 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 the most important key levels on the 4h or the daily time frame are: this could
be support and resistance, supply and demand areas, trend lines….
 The Ranging Market
These have no clear directions, when you open your chart, and you find a lot of noise,
you can’t even decide if the market is ranging, or trending.

Time frames and top down analysis

Primary time frame is the 1H, the 4H and the daily.
Price action works on bigger time frames.
To trade the 4h chart, you have to look at the weekly chart first, and then the daily chart,
if the weekly and the daily charts analysis align with the 4h chart, you can then take trading
decision.

Always start with the bigger me frame, and gather the following informa on:
The most important support and resistance levels: present turning points in market.
Identify them on weekly time frame.
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.
The previous candle: the last candle on the weekly chart is important, it tells what
happens during a week, provides valuable information about the future market move.
A er iden fying these points using the weekly chart, move to daily or 4h chart
and gather informa on 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 the most important key levels on the 4h or the daily time frame are: this could
be support and resistance, supply and demand areas, trend lines….
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, anengulfing bar or an inside bar…
 Trading strategies and tac cs
The first aspect is the market trends: Identify the market trend using multiple time frames
analysis. Differentiate between trending markets, and range bounds markets. Understand
how each market moves.
The second aspect is the level: Draw support and resistance, and draw trend lines, this
will help you better enter the market in the right time.
The third aspect is the signals: See different candlestick patterns, understand the
psychology behind its formation, and the message they send.
When you open a chart, you will try to answer three important questions:

1-What the market is doing? Is it trending, consolidating, or is it a choppy market?

If it is trending, you know how to identify if it is an uptrend or a downtrend.

If it is a ranging market, you will see that it is trading horizontally between two boundaries.
And if it is a choppy market, you close your chart and you stay away.

2-What are the most powerful levels in this market?

If the market is trending up or down, or it is ranging, you will try to find the most important
support and resistance levels.

These levels are the best zones where you can buy and sell the market.

3-What is the best signal to enter the market?

The best signal to enter the market means the right time to execute your trade. And this is
what you will learn in the next chapter.
The pin bar candles ck pa ern strategy
The pin bar candlestick is one of the most fused by price action traders to determine
reversal points in the market.
The pin bar candlestick is one of the most fused by price action traders to determine
reversal points in the market.
How to iden fy pin bar candles ck setups?
The pin bar formed in bigger time frames such as the 4 hour or daily
time frame should be taken into consideration,smaller time frames, have lot of pin bar
signals, these setups should be ignored, because smaller time frames generate lot of
false signals.
The pin bar formed in bigger time frames such as the 4 hour or daily
time frame should be taken into consideration,smaller time frames, have 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.
If you can identify a clear trend that means that you know who is in control of the market.

If you can identify a clear trend that means that you know who is in control of the market.
The anatomy of a pin bar is important as well, you have to make sure that the candlestick is
a pin bar by looking at the distance between the real body and the tail. Pin bars with longer
tails are more powerful.
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.

How to iden fy pin bar candles ck setups?

Start by identifying a clear uptrend or downtrend, and you wait for a pin bar to occur after
a pullback to support or resistance level.

This is a high-quality setup because all the following criteria are respected:
1-The pin bar is well formed, and it is in line with the direction of the market.
2-The rejection occurred in a major key level which represents a hot point in the market
(resistance level).
3-The risk to reward ratio is good, and it is worth trading
Sometimes, even if the market is trending, we can’t draw support and resistance levels,
because prices move in a certain way which we can’t spot static key levels.
Use the 21-moving average which will act as a dynamic support in an uptrend market
and a dynamic resistance in a downtrend market.

How to enter pin bar candles ck setups?

Different entry options when it comes to trading pin bars; it all depends on the candle
anatomy, the market conditions, and your money management strategy.
1-The aggressive entry option: this method consists of entering the market immediately
after the pin bar closes without waiting for a confirmation.

You catch the move from the beginning, because sometimes the price goes higher after
the close of the pin bar, and if you are not in the market, the trade will leave without you.

Take this trade because we had three important elements:

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.

When you have these three elements in the market, you just place your trade after the
close of the pin bar, and your stop loss above the long tail. your profit target will be the
next support level in case of a downtrend.
2-The conservative entry option: this strategy consists of entering the market after 50%
of the range bar retracement.

This strategy sometimes will work and it gives you more than 5:1 risk/reward ratio, and
sometimes the market will leave without you.

This entry method helps us decrease our risks and increase our rewards.

The trade above has more than 5:1 risk/reward ratio. One trade like this every month
is quite enough to generate a decent income.
One of the drawbacks of this entry option is that the market sometimes doesn’t retrace
to 50% of the range bar, which will make you feel frustrated because the market will move
to the profit target without you.
Trading pin bars with confluence
Confluence happens when many technical indicators generate the same signal, this trading
concept is used by price action traders to filter their entry points and spot high probability
signals in the market.
Trading with confluence is a must, because it will help you focus on quality setups rather
than quantity, and it will enhance tremendously your trading performance.
For example, if we are looking for a pin bar signal, we need to find other factors of
confluence to confirm our entry; we are not going to take any pin bar that we find on our
chart.
Factors of confluence:
The trend: it is one of the most important factor of confluence, this is the first thing that
most successful traders look for on their charts, you can’t trade any setup without
identifying if it is in line with the direction of the market or not.

A bearish pin bar in a downtrend is more powerful signal than the one in a range-bound
market.
Support and resistance levels and supply and demand areas: these major levels have
a significant importance in the market, because all big participants watch these specific
areas.
Moving averages: Use the 8 and 21 moving average, this technical trading tool acts as
dynamic support and resistance, and it is a very important factor of confluence in trending
markets.
Fibonacci retracement tool: Use the 61% and 50 % Fibonacci retracement to find the
most powerful areas in the market.
Trend lines: drawing these lines on your charts give us an idea about the market direction
and help us find the most important reversal points in the market.

Possible Confluence entry.

1- The Trend: the market is trading up which means that we have to follow the trend and
look for a buying opportunity.

2-The level: The support level is an important key level in the market as you can see,
price broke out of the resistance level that becomes support and pulled back to it.

3-The signal: The formation of the bullish pin bar after the retracement back to the
resistance level that becomes support.

4-Another signal: The rejection of the pin bar from the support level, and the 21 moving
average that acted as a dynamic support level.
 Pin Bars trades examples

Trading pin bars in range-bound markets

To confirm a ranging market, look for at least two touches of support level, and two touches
of resistance level, and once identified the range, then it becomes very simple to trade it by
going long when prices reaches the support level and going short when prices approach the
resistance level.

The illustration above shows three trading opportunities:

1-The first one is a pin bar rejected from the support level, you can place a buy order after
the pin bar closes, or you wait for the market to touches the 50% of the pin bar range.
Your stop loss should be placed above the support level, and your profit target must be
placed near the resistance level. The risk reward of this trade is very attractive.

2-The second trading opportunity occurs near the support level, you place a buy order after
the close of the pin bar, and your stop loss should be below the support level. your profit
target is the next resistance level.

3-The third setup is an obvious buying opportunity; as you can see the market was rejected
from the support level and formed a pin bar to inform us that buyers are still there, and the
market is likely to bounce from the support level.
The second strategy is about trading in the direction of the breakouts of major key levels
or waiting for the prices to retrace back to the breakout point and then you go long or you
short the market.

The figure above illustrates a range-bound market, the price broke out of the support level
and retraces back to the point of the breakout, and the formation of an obvious pin bar
indicates a high probability signal to short the market.
How to confirm pin bar signals using technical indicators
One of the best indicators to confirm my entries when I examine a range-bound market is
the Bollinger bands indicator.

So if we see that a pin bar is rejected from a horizontal key level and from bands, this is a
clear confirmation to buy or sell the market.
 The engulfing bar candles ck pa ern
How to trade it:

1-The trend: Trading the engulfing bar pattern with the trend is the easiest way to make
money in the market.

2-The level:
When you find a clearly definable uptrend or downtrend, the next step is to identify the most
important levels in the market. i mean the most powerful support and resistance.

These levels take different forms such as: trend lines, channels, flags, triangles… and your
ability to identify them in your chart will help you find better price levels in the market.

In trending markets, when prices pass through resistance level, that resistance could
become support.
3-The signal:
The signal here is an engulfing bar pattern; you can apply the same rules when trading the
inside bar candlestick pattern

The engulfing bar candles ck pa ern

-As a trend following tool to identify the direction of the trend, so they buy the market when
prices are above 200 simple moving average. And they sell the market when it is below the
200 simple moving average

-To determine whether the market is overbought or oversold we just watch how prices
interact with the moving averages, for example, in an uptrend, if prices move far from the
moving averages, this is an indication that the market is overbought.

-To predict the trend, change by using the crossover strategy, if the moving average crosses
over another, it is a signal of a trend reversal.

The strategy is very simple, we will use the 21 and the 8-simple moving averages in the
daily and 4-hour time frames, we will define a clear bullish or bearish market and we simply
buy when price pullbacks to the moving average and an engulfing bar pattern forms.
 How to trade the engulfing bar with Fibonacci retracement
The most important Fibonacci retracement levels are the 50% and the 61% Fibonacci
retracements.

Major moves retrace around 50 % or 61 % Fibonacci retracement, this knowledge

will provide you with the ability to predict with high accuracy the next major move in a
trending market.

The strategy is very simple, you define a clear uptrend or downtrend, and then, you define
major corrective levels by using Fibonacci retracement tool, if you see an engulfing bar
pattern matches up with 50% or 61 % levels, it is a powerful price action trading signal.

Trading the engulfing bar with trendlines

In trending markets, we use simply trend lines to highlight a trend by connecting swing
highs or swing lows in price; this way helps us find high probability entry setups in line with
the general trend of the market.

How to trade the engulfing bar in sideways markets?

Before talking about the right way to trade trendless markets, you have to be selective
about trading range bound markets to protect your trading account, because not all
sideways markets are worth trading. You have to know how to differentiate between
sideways and choppy markets.
Trading the engulfing bar candle in range bound market is very simple, the first strategy is
going to be about trading this price action pattern from major support and resistance levels.

The second strategy is to trade the breakout of the range or to wait for the pullback.

False breakouts are one of the most powerful price action strategies, it occurs in all types
of markets, and if you know how to use it in combination with the engulfing bar pattern in
a major support level or resistance, you will make money in the market, because you
will buy intelligently the bottoms and sell the tops.

Trading the engulfing bar with supply and demand zones?

Supply and demand areas are more powerful than support and resistance.
1-The strength of the move:
Pay more attention to the way the price leaves the zone, if the market leaves the area
quickly, this is an indication that banks and institutions are there.
2-Good profit zone:
You have to make sure that the level provides a good risk/reward.
3-Bigger time frames:
The daily and 4-hour supply and demand areas are the most powerful zones in the market.
 The engulfing bar candles ck pa ern

The inside bar candles ck pa ern

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.

A bearish inside bar pattern in a bull market can indicates a bearish reversal in about 65%
of the time. And in a bull market, it represents a bullish continuation signal in about 52% of
the time.

And a bullish abandoned baby as he call it, is considered a bullish reversal pattern 70% of
the time in bull markets, and 55% in bear markets
The psychology behind the pa ern forma on
The inside bar formation indicates a period of consolidation, in case of a bullish trend, it
reflects that the bulls are not buying any further on the second day, it is represented by a
small black candle on the second day, after a strong uptrend.

And in case of a bearish trend, it means that sellers are not in control of the market any
more, it is reflected by a small white candle after a strong downtrend.
 The inside bar candles ck pa ern
The inside bar can be traded successfully in trending markets particularly if the market is
moving strongly. Because the formation of this price pattern provides you with a great
opportunity to join the big move.

This strategy is very simple, you have to identify a strong trend, and wait for the formation
of an inside bar pattern in line with the direction of the market.

The formation of this pattern indicates that the market pauses before making its next move;
this will allow you to enter the market in the right time and make big profits.

How to trade the inside bar breakout with support and resistance

If you are used with trading inside bars and you understand the psychology behind their
formations, you will know that the safest entry should be after the breakout of this pattern.

The breakout of this candlestick pattern is a clear confirmation that the market is not still in
an indecision period, and sellers are obviously in control of the market.
Tips on trading the inside bar price ac on setups
1-Trade the bigger time frames
Stick with trading this signal in bigger time frames such the daily and the 4-hour time frame.

2- Trade the dominant trend

You should start trading inside bars in line with the direction of the market, especially in a
strong bullish or bearish trend.
3- Trade only from key levels
Make sure that your signal is located in a key level in the market.

4- Find different factors of confluence

Trading with confluence means combining different signals to make the best trading decision.
How to trade the false breakout of the inside bar candles ck
pa ern?
Stop loss hunting strategy:
This strategy consists of driving prices to a certain level where there are massive stop loss
orders, and the purpose is to create liquidity, because without liquidity, the market will not
move.

Trading inside bar false breakouts with Fibonacci retracements

The Fibonacci retracement helps us highlight the most important pullbacks levels in the
market. The best Fibonacci retracement levels are the 50% and 61% levels.

Our strategy is simple, we select the technical tool on our chart, and if the market moves
strongly, we wait for retracements, if the pullback reaches 50% or 61 % levels, we need
just a price action signal to confirm our entry.