Price action Bearish Candlestick Patterns

Bearish Candlestick Patterns Bearish reversal patterns are those that can be identified at the top or near the top of a bullish trend. These patterns are used to indicate a sign of weakness coming into the price and a renewed distribution of the security on the part of market participants. These patterns can be developed with one, two and even three bars. Typically, patterns are considered stronger if they develop over a longer period of time or if they are more pronounced.

One-Bar Patterns

One-Bar Patterns: Hanging Man

Hanging Men are typically only identified after a prolonged uptrend or extremely bullish move in the stock's price. Unlike a hammer, a hanging man must come after a significant move in the stock's price and therefore requires some time in order to fully develop, but there is no specific amount of time identified as appropriate for the pattern to be complete. Ultimately, look for a very strong move in the stock's price with a small body on top of a long shadow, minimum of twice the length of the body.

Important Keys
Hanging Man

· Trend: Up prior to appearance


· Description: Shadow must be 2 times the length of the body


· Confirmation: Prolonged uptrend with a close in price below the body


· Stop-loss: Below the shadow

Another critical element of a hanging man would be the confirmation, which unlike the hammer is necessary for the pattern to be significant. The confirmation should come with a close in price below the body of the hanging man as a minimum. A stronger signal would be a close in price below the shadow of the hanging man. The general psychology behind a hanging man is simple, but not intuitive. The idea is that bears came into the stock and drove the price down after a prolonged rally and the bulls came back in later on that same day to drive the price back up. The real signal comes on the confirmation with the price of the stock closing lower than the body or shadow of the hanging man. This generally indicates that the bears have gained enough strength to overcome the strong rally of the bulls. This particular pattern can either be open or closed and does not indicate greater strength one way or another.



One-Bar Patterns: Shooting Star

Shooting stars are more common and often indicate weakness in the stocks price. The idea is that the bulls came into the market and drove the price up only to be pushed back by the bears. This particular signal should have confirmation with the next day's activity, with price closing below the body of the shooting star. A stop-loss should be entered above the shadow of the shooting star, which gives the stock room to retest the area of the shadow.

Important Keys
Shooting Star

· Trend: Up prior to appearance


· Description: Shadow must be 2 times the length of the body


· Confirmation: Next day must close below the body


· Stop-loss: Above the shadow

One-Bar Patterns: Tombstone

This is essentially a shooting star without the body, but is considered extremely pronounced and less common than a regular shooting star. The idea is that the market opened and the bulls pushed the price up, but the bears came back in to close the price of the stock at the opening price for the day. There should be little to no shadow on the bottom of this pattern. Remember, the trend must have been up previously for this to count as a bearish reversal pattern.

Important Keys
Tombstone
· Trend: Up prior to appearance


· Description: Horizontal line with a long vertical line (Shooting Star without a body)


· Confirmation: Not necessary


· Stop-loss: Above the shadow


Two-Bar Patterns

Two-Bar Patterns: Dark Cloud Cover
The trend of the stock has been strong to the upside and on the open of the signal day the price of the stock is driven down under pressure from the bears, or sellers looking to take profits after the bullish run. This pattern is the exact opposite of a piercing line, which often indicates a sign of strength. Remember, the signal day must close below the middle of the previous candle's body in order to be confirmed. Typically it is not necessary to wait for further confirmation, but you could wait one more day for the price to close even lower than the signal day.

Important Keys
Dark Cloud Cover

· Trend: Up prior to appearance


· Description: Signal day must close below the middle of the previous up day


· Confirmation: Not necessary


· Stop-loss: Above the shadow

Make sure you can identify the differences between a Dark Cloud Cover and a Piercing Line. Despite one being bearish and the other bullish, they are essentially the same but on opposite sides of the spectrum. The idea of entering on this particular signal is similar to the piercing line pattern, which is a strong indication of price reversal. You should look to enter your stop above the middle of the previous trading day's body in order to give the price room to retest resistance, which is a common occurrence we will discuss more in the next chapter.



Two-Bar Patterns: Harami

Just as was the case for the bullish harami, the bearish harami is a reversal pattern that requires confirmation of the trend change on the following day prior to entering the trade. Unlike the piercing line or dark cloud cover patterns, which are extremely decisive in their change in direction, the harami indicates a change in direction with indecision. The indecision is represented by the spinning top or doji, which can either be closed or open. Typically the first

Important Keys
Harami

· Trend: Up prior to appearance


· Description: Spinning top or doji inside the previous trading day's range


· Confirmation: Next day must close below body of the spinning top or the doji


· Stop-loss: Above the body of the previous trading day's range

day will be open and the spinning top will be closed, but it is not required. The psychological element of this pattern is that the bulls have been clearly in control until a small spinning top or doji presents itself, which represents the indecision on the part of the bulls. Since a spinning top or doji represents indecision in the market, we are required to wait for the third day for confirmation. The price on the third day needs to close below the body of the spinning top or doji.

Two-Bar Patterns: Bearish Engulfing

The price of the stock has been in a good uptrend, and on the signal Day, the price of the stock opens higher than the previous close and then moves lower to close below the body of the first candle. Simply put, the signal candle is engulfing the previous candle's body. As is the case with any engulfing pattern, the greater the number of days engulfed, the stronger the

Important Keys
Bearish Engulfing

· Trend: Up prior to appearance


· Description: Spinning top or doji inside the previous trading day's range


· Confirmation: Next day must close below body of the spinning top or the doji


· Stop-loss: Above the body of the previous trading day's range

reversal signal, and it is not necessary to engulf the shadows of the previous candle. It is critical that the signal candle's body engulfs entirely the previous candle's body in order to qualify as a bearish engulfing pattern. Typically one should enter that day or on the open of the next day. Your stop-loss should be entered above the middle of the signal candle's body in order to give the price room to retest the middle of this candle, which will act as an area of resistance. Remember that longer-than-normal candles will act as support or resistance in the middle of their bodies. Take a moment and analyze the example on the next page to clearly visualize what a bearish engulfing pattern should look like on your stock charts.

Three-Bar Patterns

Three-Bar Patterns: Evening Star




An evening star is a three-bar reversal pattern and is the exact opposite of a morning star. This particular pattern represents a clear shift in direction and strength for the price of the stock. Typically you should see a strong movement upward followed the next day by a spinning top or doji representing indecision in the market. On the heels of this

Important Keys
Evening Star

· Trend: Up prior to appearance


· Description: Signal day (third day) must close below the middle of the first day


· Confirmation: Confirmed on the signal day with the close below the middle of the first day's trading range


· Stop-loss: Above the spinning top or the middle of the first trading day

indecision the bears come raging into the stock and drive the price down below the middle of the first day's body. It is critical that the signal day closes below the middle of the first day on this particular pattern. If identified correctly, Morning and Evening Stars can represent major shifts in market sentiment and offer a great opportunity to capitalize on major movements in the stock's price. If you enter on the signal day or the following day, enter your stock above the spinning top or above the middle of the first day.

Indecision Patterns

Indecision Patterns: Doji

This one-bar pattern is a sign of indecision in the price movement of the security, but should not be traded without confirmation. The doji is often present with harami and engulfing patterns. It can also show up as the star on the morning or evening star. In all of these patterns it is critical to wait for the confirmation, which often is the signal day.

Important Keys


Doji

· Trend: Up/Down prior to appearance


· Description: Looks like a plus sign - signals potential resistance or support


· Confirmation: Confirmed when combined with one of the previously discussed patterns


· Stop-loss: Depends on pattern identified

These patterns often are found alongside spinning tops and indicate a potential area of support or resistance. Take a moment to familiarize yourself with this particular pattern.



Indecision Patterns: Spinning Top

These are similar to the doji in that they represent indecision in the market. These should not be traded without confirmation of a change in price direction. As previously mentioned, these often indicate a potential area of support or resistance in the price of the stock. There is no significance in these being opened or closed patterns.

Important Keys
Spinning Top

· Trend: Up/Down


· Description: Small body with a shadow at the top and bottom - signals potential resistance or support


· Confirmation: Confirmed when combined with one of the previously discussed patterns


· Stop-loss: Depends on pattern identified

( sources: http://www.optionsxpress.com)

Price action Bullish Candlestick Patterns

Bullish Candlestick Patterns Bullish reversal patterns are those that can be identified at the bottom or near the bottom of a bearish trend. These patterns are used to indicate a sign of strength returning to the price and a renewed accumulation of the security on the part of market participants. These patterns can be developed with one, two and even three bars. Typically patterns are considered stronger if they develop over a longer period of time or if they are more pronounced.

One-Bar Patterns


One-Bar Pattern: Hammer

Hammers are extremely common and should be identified at the end of a downtrend. There is no specific amount of time needed for the downtrend to be in motion before the appearance of a hammer or inverted hammer.

Important Keys
Hammer

· Trend: Down prior to appearance


· Description: Shadow must be 2 times the length of the body


· Confirmation: Not necessary


· Stop-loss: Below the shadow

The general psychology behind a hammer is the concept that bears came into the market on the open and forced the price down, but the bulls came back in full force during the day to drive the price back up before the close. This particular pattern can either be open or closed, but some traders do prefer to place more emphasis on an open hammer as the POWER HAMMER, as opposed to a closed hammer (as indicated in the illustration below). The hammer is identified when the body of the hammer is at the top of the shadow and the shadow is at least twice the length of the body. Generally, one should look for a more pronounced shadow to body ratio than simply twice the length.

Hammers do not generally need confirmation, but one should wait for the next day before entering the trade. As a general rule of thumb, if you do enter the trade on the hammer, make sure that your stop-loss is entered below the shadow of the hammer. Typically the following day the market will retest some part of the shadow, which is the reason for your stop being entered lower than the shadow of the hammer. Later on we will discuss the idea of filtering candles with different indicators in order to strengthen or weaken the indicator.




One-Bar Pattern: Inverted Hammer

As for the Inverted Hammer, this is a little tougher to understand psychologically, but it is considered a bullish indication. The idea is that the market opened and the bulls rallied in, but were driven back by the bears later that day. This is a pattern that would require more of a confirmation the following day compared to an actual hammer. You should look for the price to close higher the following day compared to the body of the inverted hammer. The stop-loss should be placed below the body of the inverted hammer if price confirms the following day. Once again, the shadow should be approximately twice the length of the body. As indicated previously, one should look for a more pronounced shadow to body ratio.

Important Keys


Inverted Hammer


· Trend: Down prior to appearance


· Description: Shadow must be 2 times the length of the body


· Confirmation: Next day must close above body


· Stop-loss: Below the body

Generally, one would prefer to see little to no shadow on the top of the hammer or on the bottom of the inverted hammer. However, it does not diminish the strength of the hammer if there does exist a small shadow. This is generally referred to as a hammer without a shaved top (head) or an inverted hammer without a shaved bottom.




One-Bar Pattern: Dragonfly


This particular pattern is essentially a hammer, but a very pronounced hammer. The idea is that the market opened and the bears pushed the price down, but the bulls came back to close the price of the stock at the opening price for the day. There should be little to no shadow on the top of this pattern and this is considered to be less common than an actual hammer or inverted hammer. Remember, the trend must have been down previously for this to count as a bullish reversal pattern.

Important Keys
Dragonfly

· Trend: Down prior to appearance


· Description: Horizontal line with a long vertical line (hammer without a head)


· Confirmation: Not necessary


· Stop-loss: Below the shadow

Two-Bar Patterns

In order to discuss the two-bar patterns or the three-bar patterns, you must understand a simple concept of candles. When a longer-than -normal body is present on the chart, the middle of that particular candle will act as an area of support or resistance. This concept will be discussed more completely in the support and resistance chapter. Just remember that the longer the candle's body, the stronger the middle of that candle is going to be for near-term support or resistance.




Two-Bar Patterns: Piercing Line

This particular pattern requires two bars, which increases the strength of the signal compared to a one-bar pattern. The concept is simply the price of the stock has been trending down and has moved down on a strong day. The following day the price of the stock opens low, but rallies all day to close above the middle of the long black bar of the previous day. Basically, support was tested and was not only held by the bulls, but they were able to rally back the following day. It is critical that the price of the stock closes above the middle of the previous day's body, because this represents confirmation of the pattern. Some traders will wait another day to ensure that the price of the stock is reversing, but it is not required.

Important Keys
Piercing Line
· Trend: Down prior to appearance


· Description: Signal day must close above the middle of the previous down day


· Confirmation: Confirmed on the signal day with the close above the middle of the previous day's trading range


· Stop-loss: Below the middle of the previous day's trading activity




Two-Bar Patterns: Harami

This particular two-bar reversal pattern must have a confirmation of the trend change prior to entering the actual trade. Unlike the piercing line pattern, which is extremely decisive in its change in direction, the harami indicates a change in direction with indecision. The psychological element of this pattern is that the bears have been clearly in control until a small spinning top or doji presents itself. Typically a spinning top or doji represents indecision in the market, which means waiting for the third day for confirmation. The price on the third day needs to close above the body of the spinning top or doji.

Important KeysHarami

· Trend: Down prior to appearance


· Description: Spinning top or doji inside the previous trading day's range


· Confirmation: Next day must close above body of the spinning top or the doji


· Stop-loss: Below the body of the previous trading day's range

Two-Bar Patterns: Bullish Engulfing

    A bullish engulfing pattern is considered a very strong reversal indicator for the current price trend. This pattern does not require any confirmation on the third day due to the nature of the pattern; however, some traders do wait for the third day to close higher than the signal day for further confirmation of the reversal. The underlying psychological element of this reversal pattern is based on the idea of a strong downward movement in the price of the stock with the next day opening up and engulfing the previous day's trading activity, which is referred to as the signal day. Keep in mind that the greater the number of days engulfed by the signal day, the stronger the reversal. As for stop-loss entry, typically one should enter the stop-loss below the middle of the signal day as indicated in our discussion previously on strong days establishing support/resistance in the middle of the range for the day.

Important Keys
Bullish Engulfing

· Trend: Down prior to appearance


· Description: Signal day must engulf the previous trading day's body


· Confirmation: Confirmed on the signal day with the engulfing of the pattern


· Stop-loss: Below the middle of the signal day

Three-Bar Patterns



Three-Bar Patterns: Morning Star

     Three-Bar Patterns: Morning Star This three-bar pattern is one of the strongest patterns and when identified can lead to a strong price reversal. The idea of the pattern is a strong bearish trend with a spinning top on the second day. The spinning top indicates a moment of indecision in the market, which can often be taken advantage of on the following day. The signal day is the third day in which the price closes above the middle of the first day. Ideally, one would prefer to see a gap between the first day, the spinning top and the third day. However, a gap is not necessary and only adds strength to the pattern.

Important Keys
Morning Star

· Trend: Down prior to appearance


· Description: Signal day (third day) must close above the middle of the first day


· Confirmation: Confirmed on the signal day with the close above the middle of the first day's trading range


· Stop-loss: Below the spinning top or the middle of the first trading day

sources: http://www.optionsxpress.com

Money management on financial market and gamble - improve the rate of profit and loss (sources: collection)

Notice: don't use it if you don't have a system to know what you do. you must know to put sl ( fisrt money management, it's help you know when you will wrong), and the money management method below is the second money management. it's base on the gamble so be careful with this, the same with dollar costing everage method, it make you feel comfortable when trading, but will kill you so fast if you can not control yourself, (control your system). Money management system is to handle the bet for you. A lot of people did not pay attention to the management of their money. They do not control the amount or quantity of their winnings. You must know that money is ammunition, the house is your enemy. To kill the ones you need ammo and you have money, you have to be careful prenatal care. Besides money management, betting system also acts as guide and betting is called "System". I will explain in detail each of the following systems:

1 - Kelly Criteria

2 - Martingale

3 - D'Alembert

4 - Sequence Fabonacci

5 - 1-3-2-6

6-10%


1 - Kelly Criteria

Kelly Standard was developed in 1956 by John L.Kelly. Kelly's theory to optimize the growth of your funds (ie funds betting) in the long term by determining the optimal stake in a bet.

2 - Martingale

Martingale System works like? Every time you lose, double your bet until you win. The theory behind this system is that you will get the original bet and your profits.

You start with one bet. If you win you start again with a new one bet. If you lose double your bet until you win. When you win you will get back what you lost all and still be profitable is the amount of the first bet.

Although very effective in theory, but this system requires you to have a huge amount of capital, profits are low and very dangerous because the maximum bet limits imposed by the betting companies. If you run out of money or reach the limit of betting companies, you can lose a lot but do not have the opportunity to recover damages you.

The principle of the Martingale system is as follows:
Martingale 1-2-4-8-16-32.
Every time you lose, double your bet, as many times until you win then return to the original, for example:

1. Bet $ 1 and win. Continue to bet $ 1 for losing, then bet $ 2.
2. If you win $ 2, or about $ 1 bet. If you lose, then bet $ 4.
3. If you win $ 4, back to $ 1 bet. If you lose, then bet $ 8.
4. If you win $ 8, or about $ 1 bet. If you lose, then bet $ 16.
5. If you win $ 16, or about $ 1 bet. If you lose, then bet $ 32.
6. And continue until a winner .......

3 - D'Alembert

One common system is named after mathematician Jean le Rond d'Alembert, a mathematician and physicist, born in 1717 France. His theory of a balance of success and failure of certain events, if you consider a long chain of events. sometimes called "pyramid system", you increase your bet one unit after losing 1 and decrease your bet one unit after a win. The sequence and amount raised or lowered can be varied to suit particular games and odds. For example:

1. First $ 1 bet. If you win, bet $ 1. If you lose, bet $ 2.
2. If you win $ 2, continue to bet $ 1. If you lose the bet to $ 3.
3. If you win $ 3, $ 2 bet next. If you lose the bet to $ 4.
4. If you win $ 4, to $ 3 bet. If you were to bet $ 5.
5. Do the same.

4 - Sequence Fabonacci


1-2-3-5-8-13-21-34. To be simple to understand PROGRESS 1 2 Prev. Go up the steps if lost, down 2 steps if you win. Note that each winner pays twice before losing it. For example:

1. Bet $ 1 until you lose. Then bet $ 2.
2. If you win $ 2, then go back to step 1. If you lose, then bet $ 3.
3. If you win $ 3, then go back to step 1. If you lose, then bet $ 5.
4. If you win $ 5, then go back to step 2. If you lose, then bet $ 8.
5. If you win $ 8, then go back to step 3. If you lose, then bet $ 13.
6. If you win $ 13, then return to step 4. If you lose, then bet $ 21.
7. If you win $ 21, then go back to step 5. If you lose, then bet $ 34.
8. If you win $ 34, then go to Step 6. If you lose, go back to step 1.

5 - 1-3-2-6 System

The system's name says it all. It is based on the principle that you can win then 4 times your bet. Initially you will bet 1 unit, the 2nd is 3 units, the 3rd is 2 units, the 4th of 6 units. Suppose that 1 unit is $ 10 and the rate of food eaten is located 1 1. At first bet 1 unit, having won the first $ 10, you add $ 20 to $ 30 and bet enough 2nd, if you win you will have to all be $ 60, $ 40 in interest you , 3rd times the bet is $ 20, if the total amount of your winning rate after 3 times bet would be $ 60. Continue bet 4th time you bet $ 60, if you win the $ 120 rate at 4 times the bet. The snow voi.Sau when you win the bet with the system to start with 1 unit.

    If you lose the first time, you will lose $ 10
    If you lose in the 2nd, you will lose $ 20 (for the first time your bet was $ 10)
    If you lose in the 3rd, you still profit $ 20 (for your 1st and 2nd interest rate $ 10 $ 30)
    If you lose in the 4th, you draw and you lose nothing ($ 10 rate for 1st, 2nd rate $ 30, 3rd $ 20 rate)

The appeal of this system is that you risk $ 20 to get $ 120 profit opportunities. That means you can lose 6 times in the worst times bet (bets placed 2nd) and just 1 time you win the bet (bet 4 times in the system) will be back on with your money.


6 - System 10%

With each time you increase your bet loses more money you have lost 10% and decreased the nearest 10% each time you win.

The Dow theory

Dow Theory The market changes with every trend can be predicted on the basis of price movements on the chart. The assumption of the Dow: Most stocks follow the underlying trend of the market. The trend of the underlying trend of the market is understood as "the average price index" - reflecting the general trend of a stock market represents. The premise: Only use closing prices: price reflects the closing price, can be predicted, and the impact on the relationship of supply and demand of the market

Using averages: The average of all average:
• The daily fluctuations
• The impact on supply conditions - for the stock,
• The investment decision is expected no surprises
Dow Theory Explained
Dow Theory is based on six basic principles:

Principle 1:
• Include all information: economic factors, political and psychological factors, the ability to increase the company's profits
• All knowledge of all market participants (traders, investors, portfolio managers ...)

Principle 2: 3 The market shift:

1. The shift key (primary movement)
o In the first market price up (bull market) is a move up in a large way, at least 18 months.
o speculative market prices down (bear market)
As a long decline and will stop when there is a significant recovery in stock prices.

2. The secondary reaction:
o A significant decline in the market price speculation or a significant increase in the speculation market prices down
o The time period generally receding shifted from 33% - 66% (1/3 to 2/3)
o Extend from 3 weeks to several months, usually 3 months.
o It is important to form a major part of the movement as well as secondary displacement.

3. The small shift: (minor Movements) This shift represents MSU as a slight fluctuation in price over the trading day, going on a very short time.

Principle 3:
• Each trend generally occurs in three distinct phases
• In the bull market has three stages.
• Phase accumulation can purchase the savvy investor expertise
• the public participation phase: occurs when prices began to rise quickly and the news business will be improved
• Phase distribution: when the economic news gets better when the volume and nature of the involvement of the public and increase
• In the bear market has 3 stages:
• Phase distribution
• Phase panic
• Phase forced selling

Principle 4:
• The relationship creates value and volume basis
• The relationship is fundamental to increase the volume and value recovery narrow the discount.
• If volume becomes stagnant while prices rise and increase when prices fall, warning that the trend is reversed soon.

Principle 5:
Signs given rise to continuous rising prices create higher highs and discounts interjected forming higher bottoms. And contrary to sign off.

Principle 6:
Be aware of the combination index for each sector mutual. Eg:
• The industry average: the average price of 20 shares of American industry;
• The average transportation industry (Transportation): is the average price of 12 shares U.S. transportation sector;
• In a developing economy, the development industry, the transportation sector is second only to develop the industry average and the average transportation industry will reinforce each other.

Simple way to Iidentify support and resistance

What is support and resistance? that's the level that price don't want to get over. At first, we must identify the sideway zone of the price ( where prices repeat in there ), you can see this zone by using the bollinger band, when the high or low band stop extending, and the frequency of the price is consecutively growing, I use Market_Statistics_v6_0_Drag.mq4 indicator to show it. Mark the high and low of this range, we get the support and resistance level, where price hardly get over. for example you can see in this chart:

Drag the indicator to the trend where you want to analyze.