Candlesticks are the most important indicators when it comes to making the trading decisions. Forget about Stochastic, MACD, RSI and other indicators. Most of these indicators are lagging. Just focus on candlestick patterns and you will understand what the market is doing. Candlestick patterns tell you whether the trend is going to reverse or continue. If you are using MACD, you will always be late. MACD will tell you when the market move has already reached the halfway mark.
Using Candlestick Patterns In Projecting Price Target
When you enter into a trade, you should have an idea how much the market is expected to move and where you should expect to take profit and close the trade. Many traders use Fibonacci levels in projecting the targets when they should take the profit. Now this an method that uses candlesticks in projecting the price targets. Stephen Bigalow is an expert when it comes to using candlesticks in your trading. Watch this recorded webinar below in which he explains in detail how you are going to use candlesticks in projecting price targets.
Keep your trading simple. This is also known as the KISS principle. Candlesticks just depict the market sentiment. When you have a bullish candlestick you know the buyers are dominating the market and the chances of market moving higher are more than it going down. When you get an inside bar that follows a bullish candle it means the buyers could not take price above the high made by the previous candle. It is a signal that market is facing resistance going higher. So just by looking at these patterns you can figure our what the market is doing. If you want, you can watch this 20 minute video that explains some very important candlestick patterns.
In the above recorded webinar, Stephen Bigalow tells you how you can project price targets by looking at the candlestick patterns. Now you can use these patterns on 5 minute, 15 minute, 30 minute, 1 hour, 4 hour, daily and weekly timeframes. But just keep in mind that H4, D1 and W1 timeframes are much more reliable as compared to the lower intraday timeframes of H1, M30, M15 and M5. The highs and lows made by the weekly and daily candles are important S/R (support/resistance) levels. High and low made by the 4 hour candle are also important intrady S/R levels that you should watch. Highs and lows made by H1, M30 and M15 candles are not important. Most of the time you will find them getting broken.
Focus on H4 and Daily Candles
So just focus on the daily and H4 candles. These are important. This is what we do. we use the 4 hourly candle for our entry and exit signals. This gives you ample of time to plan and monitor your trade. You should also watch this recorded webinar that gives an important insight that most traders miss. This skill is going to help you understand what the market is doing by simply combining 2-3-4 candlesticks. Why doing candlestick maths is important? You see H4 candle encompasses 4 hours of price action. It contains four H1 candles and eight M30 candles so what an H4 candle tells is much more solid than what an H1 or an M30 candle tells. Now it would be a good idea to combine two H4 candles and see what an H8 candle says. This H8 candle is much more powerful than an H4 candle as it encompasses 8 hours of price action. Watch the above webinar that explains how you can do that by simply combining the High, Low, Open and Close of the two H4 candles. There are traders who just look at the H8 candles. What this means is that they check their charts after 8 hours. Whatever you do just follow the KISS principle and try to keep your trading system as simple as possible.