hey everyone thanks for checking out this video my name is Travis rose I'm
the creator of the master the market education that you can find link below
in the description I had a few people asking me recently about candlesticks
and different candlestick patterns that we see whether you're day trading swing
trading or even longer term investing so I kind of wanted to just put together
this pretty short video to go over some of the basics out candlesticks the
anatomy of what actually makes up these candlesticks and go over some of the
most frequently seen candlestick patterns that I use on a pretty frequent
basis as a day trader so first and foremost for those of you who don't know
candlesticks are a type of chart style that you can use and I'm going to be
using the thinkorswim platform with TD Ameritrade so I'm gonna go over to my
platform here and you can see I already have a candlestick chart pulled up but
to give you an idea of some of the other chart Styles that you can actually use
all you have to do is go up to the top of your screen and this is what
thinkorswim of course but this is going to be a pretty similar process
regardless of the platform that you are using I just click on chart style and
then chart type and you can see we have bar charts candles candle trend I can
actually line area and equable um-- so to compare candle charts for example to
something like a line chart you can see that the line chart is just
one continuous line throughout the entire day whereas when we look at
something like a candlestick chart you're going to have different
timeframes of course but for this example we are on the one-minute one day
chart so that means that each of these candles is going to represent one minute
of price action and every single minute a new candle is going to open and then
close before new one forms you
so when these candles open and close we know that they're going to have movement
in between that open and closed and because of that they're gonna form also
a high and a low so these candlesticks are made up of four main points being
the open high low and close now of course when we're looking at a green
candlestick all that means is that the candle closed at a higher price then it
opened for that specific period of time on the other side of the spectrum red
candlesticks simply mean that the candle closed at a lower price than it opened
and for some terminology the colored part of these candlesticks are actually
known as the real body so the real body again is that colored section of the
candlestick that's gonna be the most dominant part and then you're gonna also
see two lines sticking out from the top and the bottom of your candlesticks and
that line sticking out from the top is known as the upper wick also commonly
referred to as the upper shadow and all that does is show us the highest point
that the price went with in that candlestick before it closed the lower
wick is the line that sticks out from the bottom of the candlestick and that's
going to show us the lowest point that the price went before that candlestick
closed so again like I mentioned while we were
over on the thinkorswim platform we were looking at the one-minute 1-day chart
which means that it was showing us an entire day of price action but each
candle was only representing one single minute price action so these
candlesticks can represent price action over really any defined period of time
you can look at shorter timeframes like the 1 minute the 5 minutes 60 minutes or
longer time frames like an entire day an entire week or even an entire month and
so on and so forth and really any timeframe in between and because of that
you're gonna see these candlestick patterns forming on many different time
frames which is exactly why it's so important to understand them and which
is exactly why you can use them for day trading swing trading or even longer
term investing the thing that you need to keep in mind is that a pattern on a
one-minute chart for example is going to be used for a short term day trade
rather than a longer term investment on the other side of the spectrum a pattern
form on the one day chart would most likely be used for a longer term
position that you would likely hold for at least a few days
even up to a few weeks or longer now getting into some candlestick analysis
here what the candlesticks themselves actually can show us is the real time
supply in demand for a stock supply and a man is actually the sole reason that
stocks move up and down when a stock is moving up that simply means that there's
more demand for that stock than there is supply meaning that there's more buyers
lined up than there are sellers and when a stock is moving down that simply means
that there is a stronger supply then there is demand meaning there's more
sellers than there are buyers so when we look at candlesticks themselves once you
know what to look for you can realize that they actually show us a little bit
about the supply and demand for the stock within a specific period of time
so if we look at the red candle on the left side of the screen you can see that
there's a very long upper wick on that candlestick and that tells us that the
stock within that candlestick spiked up pretty high but somewhere
before the candle closed sellers took control and push the price all the way
back down and actually pushed it back below where the candlestick opened so
that tells us that at that price or up near those highs there's a lot of
selling pressure and there's a auto-supply with the green candlestick
like the one we see on the right there's clearly a very long lower wick and that
tells us that down at those prices there's a lot of demand for the stock
and there's a lot of buying pressure and many times we can use this information
to actually form entries and exits on our trades in one way that we can do
that is we can look for reversal points in the market these candlesticks can
actually be a clear indication of a reversal and that many times is going to
allow us to get into a trend at the very beginning of it and profit from the
stocks reversal so for example once you start seeing long upper wicks on candles
when the stock is in an uptrend that many times can be a bearish reversal
sign so a bearish reversal simply means that that is going to reverse to the
downside and if we look at the diagram down at the bottom this is something
that we see very commonly as day traders swing traders while investors will start
to see a very long upper wicks on these candlesticks when a stock is at the top
of an uptrend and about to reverse back down into even a downtrend so if you're
in a position and you bought shares and you start to see all these long upper
wicks and you're in the profit on your position many times this can be a good
indication to sell and lock in some of your profits and even potentially look
to short sell to profit from the reversal to the downside now the same is
going to be true for stocks that are in a downtrend once you start to see a lot
of long lower wicks on candles when the stock is in a downtrend this can many
times be a bullish reversal sign which allows us to spot an area where buyers
are taking control of the stock and many times can be a great opportunity for us
to buy into the stock and profit from that bullish reversal and I just wanted
to include a real-life example of this you can see the stock symbol TRC here
there's a very clear line of resistance on this stock at about 18 dollars and 75
cents and you can see that on three separate occasions the stock spiked into
that resistance level in all three times the stock forms some long upper wicks on
the candles before having a strong reversal to the downside now another way
that we can spot reversals in the market by using our knowledge of can
six is by looking for what are known as doji patterns a doji is a candlestick
with virtually the same open and close price often again indicating a reversal
in the market and if you look at the examples down at the bottom you can
clearly see that doji looked very different from a regular candlestick
because there's really no real body to the candle and it's mostly formed by
just long upper and lower wicks so on the Left example you can see the stock
is moving up which could be considered an uptrend and then you see that there's
a doji formed with a long upper wick again showing us that there is probably
some selling pressure at that price because the stock failed to hold up near
its highs and came all the way back down to where that candle opened before it
closed and that's going to indicate to us that there is potentially a bearish
reversal going on which would allow us to sell out of our position and even
look to open a short position and in the right example the same is going to be
true this time we have a downtrend though and before we see that it
reverses to an uptrend you can see that there is a nice bullish reversal doji
formed with a very long lower wick showing us that buyers are taking
control of the stock
and again here is just a quick real-life example of this while you can see that
before the doji is formed there is a bit of a downward move then the doji does
form again with a long lower wick buyers start to take control the stock
consolidates a bit in that area and then from there once it starts to break out
we see a very strong move up so the last type of candles that I want
to go over in this video are what are known as engulfing candles an engulfing
candle happens when the real body of a candle covers or engulfs the entire real
body of the previous candle and there are two types of these engulfing candles
the first of them is what are known as bullish engulfing candles and this is
going to be a bullish reversal pattern often forming at the end of a downtrend
and what this looks like is if you take the example at the bottom you can see
that the real body of the green candle completely covers or again completely
engulfs the entire real body of the previous red candle and again this can
show us that the price action is reversing to the upside and many times
this can be a good opportunity to buy into the stock or if you happen to be in
a short position in this stock it may be a good indication that you should cover
your short position and lock in your profits before the stock starts to
bounce back up now the other type of engulfing candle that we see are going
to be bearish engulfing candles and this is just going to be a bearish reversal
pattern forming many times at the end of an uptrend and is going to indicate to
us many times that the price action is reversing to the downside allowing us to
sell out of our long positions and lock in our profits near the top or even open
a short position to profit from that bearish reversal and profit from the
stock then moving down from that area so just to show you a real-life example of
this we have the daily chart here for the stock symbol our okay you and you
can see that this started off with a big gap up on the daily chart from about
$100 per share all the way up to the following day about a hundred and
twenty-five dollars per share it hit and from there it trended all the way up to
about a high of 175 and right there are 175 in this box here you can see that
this red candle completely engulfs the entire real body of the previous green
candle showing us that there is a bearish engulfing here and what we see
from that area is then the price falls from that 175 level all the way back
down to about a hundred dollars per share so that really just goes to show
you how effective these candlestick patterns can be and this was a great
example of a bearish engulfing pattern and would have allowed anybody that
invested into the stock earlier in the week or even earlier in the month to
lock in their profits there at the top and even potentially switch over to a
short position to profit from that move back down to $100 so that is going to be
the basics of some of the candlesticks and candlestick patterns keep in mind
there are plenty of other candlestick patterns we went over the engulfing
patterns that are also bearish and bullish tweezers there are evening stars
hammers inverted hammers morningstar's shooting stars spinning tops three black
crows three inside down three inside up three white soldiers and so on and so
forth in this video I did just want to cover some of the basics and go over
some of the most commonly seen candlestick patterns and if you liked
this video make sure to give it a like and subscribe to the channel because I
will be doing a lot more content like this and I'm even going to go over some
of these other candlestick patterns in more detail in another future video also
if you found this video helpful I highly recommend you check out my website link
down below in the description it's called master the market I mean on there
we have 8 total courses with over 15 hours of content 70 practice quizzes in
much more there are courses going over day trading swing trading and even
longer term investing and you're actually able to get all of them
together in a bundle if you're interested in doing that for a 50%
discount or you can look into some of the individual courses themselves and
again if you like this video then I think these courses will be very very
helpful for you and so far I've had a lot of positive feedback on them you can
actually read some of the reviews here on the reviews page and if you have any
questions about it go over to the support page and you can read some of
the frequently asked questions and even reach out and ask questions to me
personally and I'll get back to you as soon as possible
but anyway again I hope this was helpful thank you for watching the video and
I'll see you in the next one
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