Sunteți pe pagina 1din 53

Profitable Candlestick

patterns

www.tradingourway.com

Kermit Prather
kermitp@tradingourway.com

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

CRUISE to the Panama Canalon CARNIVAL LIBERTY


Set sail April 12, 2008 for 8 glorious days!
8-Day Western Caribbean
Ports of Call Include:
Port Everglades, Costa Maya,
Puerto Limon, Colon

You will learn

Inside Stateroom - $687


p/p
Oceanview Stateroom $807 p/p
Balcony Stateroom to:
$1057 p/p
BOOK by October 29, 2007

Plus, the Trading Strategies to do all of the above


Adjust your Trading strategy to market conditions

Seminar fee is $795


We had an Early Bird special of $495 that Expired Oct
IF you sign up today or within 7 days well honor the $49
Use Promo code FTL110407, good until 11/12/07

http://tradingourway.com/CruiseRegistration.htm or call Kermit Prathe


Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

Topics and Patterns for Discussion

Basics of Candlesticks
Major Bearish patterns
Major Bullish patterns
How to improve probabilities and
profitability
Recent examples for each candlestick
pattern
Where to find more information on
candlesticks
Seminar at Sea special pricing for
attendees onlyCopyright 2007, TradingOurWay,
Prepared by Kermit Prather

Candlestick Basics
Japanese Rice Traders created them
over 400 years ago
Steve Nison is credited with introducing
them into the U S markets
Gregory Morris and Stephen Bigalow are
the other 2 major candlestick gurus
There are over 100 Candlestick patterns
Candlesticks show investor sentiment
more visual than OHLC bars
Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

Bearish Candle
Sometimes referred to as a Black
Candle

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bullish Candle
Sometimes referred to as a White
Candle

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Indecisive Candles
Doji at the top should never be ignored
The smaller the body the more
indecision
Doji body is very small 10% of daily
range

Dragon-Fly Tombstone
Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

Long-legged

Indecisive Candles (cont)


Spinning-Top
No one won the battle of the Bulls and
Bears
Body is less than 1/3rd of the candle
range H L
The tails are longer than the body

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Candlestick Web Sites


www.tradingourway.com
www.candlestickforum.com - Steve Bigalow
www.candlestickchart.com/glossary.html - Litwit.com
www.thepatternsite.com - Tom Bulkowski

www.stockcharts.com - John Murphys

www.tradeon.com for TC2007users


www.stockfetcher.com Scans for candlestick patterns and
more
Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

Bullish Candlestick Patterns


Engulfing
Morning Star
Hammer
Three White Soldiers
Kicking

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bullish Engulfing Definition


Bullish Reversal 63% of the time
How to Identify it
Candle 1 is a bearish candle
Candle 2 completely engulfs
the body of the candle 1
Stock in a downtrend or
consolidating
Pattern suggests downtrend
has lost momentum and the
bulls may be gaining
strength
Engulfing pattern is also the
first two candles of the Three
Outside patterns.
Confirmation is suggested
Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

Bullish Engulfing- bad one

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bullish Engulfing- bad two

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bullish Engulfing good one

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bullish Engulfing good two

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Morning Star
Bullish Reversal 78% of the time
How to Identify it
First candle is a long black
candle
Second candle gaps down
and trades within a small
range and closes at or near
its open.
The third candle is a white
candle
Stock has in a downtrend or
consolidating
Pattern suggests the
trading sentiment has
changed and trend reversal
is a high probability
No confirmation is required
or suggested
Copyright 2007, TradingOurWay,
Prepared by Kermit
Prather
Note:

Morning Star - good

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Morning Star - bad

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Hammer
Bullish Reversal 60% of the time
How to Identify it
Single candle pattern
Candle can be bullish or
bearish
Signal considered stronger
if candle is bullish
Candle body is less than 1/3
of the range H L
Stock is in a downtrend
Long tail implies sharp selloff after open but the bulls
rallied and won the battle
suggest more buying to
come
Requires confirmation
Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

Three White Soldiers


Bullish Reversal 82% of the time
How to Identify it
Three white candles occur,
each with a close above the
previous candle
Each candle opens within
the body of the previous
candle
Each candle closes near or
at its high
Stock is in a downtrend
Pattern suggests the
market has been selling of
for too long, and buyers are
beginning to come back into
it
No confirmation is required
Copyright 2007, TradingOurWay,
Prepared by Kermit
Prather
or suggested

Three White Soldiers - good

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Three White Soldiers - bad

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bullish Kicker
Bullish Reversal 53% of the time
How to Identify it
The first candles open and
the second candles open are
the same.
The price movement is in
opposite directions from the
opening price.
The trend has no relevance
in a Kicker situation.
The signal is usually formed
by surprise news before or
after market hours.
The price never retraces
into the previous candle's
trading range.
No confirmation is required
suggested
Copyright 2007, or
TradingOurWay,
Prepared by Kermit
Prather
The
first day is a Black

Bullish Kicker - good

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bullish Kicker - bad

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Stockfetcher.com Bullish
Scans

Bullish Engulfing
Bullish Morning Doji Star
Hammer
Bullish Three White Soldiers
Bullish Kicking

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bearish Candlestick Patterns


Engulfing
Evening Star
Hanging Man
Three Black Crows
Kicking

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bearish Engulfing
Bearish Reversal 79% of the time
How to Identify it
First candle is a white
candle
Second candle is Bearish
and its body completely
Engulfs the first candles
candle body
Stock has been in an
uptrend
Pattern suggests the bears
have taken control and the
trend is about to reverse.
Confirmation is suggested

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bearish Engulfing - Bad

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bearish Engulfing - Good

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Evening Star
Bearish Reversal 72% of the time
How to Identify it
First candle is a long white
candle
Second candle trades within
a small range and closes at
or near its open.
The third candle is a black
candle
Stock is in an uptrend
Pattern suggests the
trading sentiment has
changed and trend reversal
is high probability
No confirmation is required
or suggested
Copyright 2007, Note:
TradingOurWay,
Prepared by Kermit The
Prather second

candle can be

Evening Star

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Evening Star

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Hanging Man
Bearish Reversal 59% of the time
How to Identify it
Single candle pattern
Candle can be bullish or
bearish
Signal considered stronger
if candle bearish
Candle body is less than 1/3
of the range H L
Stock is in an uptrend
Long tail implies sharp selloff after open and suggest
more selling to come
Requires confirmation

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Three Black Crows


Bearish Reversal 78% of the time
How to Identify it
Three black candles occur,
each with a close below the
previous candle
Each candle opens within
the body of the previous
candle
Each candle closes near or
at its lows
Stock is in an uptrend
Pattern suggests the
market has been at a high
price for too long, and
investors are beginning to
compensate for it.
No confirmation is required
Copyright 2007, TradingOurWay,
Prepared by Kermit
Prather
or suggested

Three Black Crows - Bad

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Three Black Crows - Good

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bearish Kicker
Bearish Reversal 54% of the time
How to Identify it
The first candles open and
the second candles open are
the same.
The price movement is in
opposite directions from the
opening price.
The trend has no relevance
in a Kicker situation.
The signal is usually formed
by surprise news before or
after market hours.
The price never retraces
into the previous candle's
trading range.
No confirmation is required
Copyright 2007, TradingOurWay,
Prepared by Kermit
Prather
or suggested

Bearish Kicker - Bad

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Bearish Kicker -Good

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Stockfetcher.com Bearish
Scans

Bearish Engulfing
Bearish Evening Doji Star
Hanging Man
Bearish Three Black Crows
Bearish Kicking

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Tom Bulkowskis
www.thepatternsite.com

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Candlesticks Statistics where


to find

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Candlesticks Statistics
cont.

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Candlesticks Statistics
cont.

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

Candlesticks Statistics
cont.

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

How to enhance
probabilities
Visually observe the chart for proper
trend
Up-trend Moving Averages align topdown 20, 40, 50
Downtrend from top-down 50, 40 ,20
Trendline
Linear regression slope
Pattern occurs at or near a major MA
Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

Use Efficiency Rating


Van Tharp uses an efficiency rating created
from price change during 4 time periods
Pick any 4 periods such 20, 45, 90, & 180
TC2007 Formula using daily range
(((C C180) / (AVGH180 AVGL180)) +
((C C90) / (AVGH90 AVGL90)) +
((C C45) / (AVGH45 AVGL45)) +
((C C20) / (AVGH20 AVGL20))) / 4

Rating > + 7 are in an uptrend while < -7 in a downtrend


Tharp uses an ATR but daily range works as well
Stockfetcher results

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

How to enhance profitability


Use Overbought / Oversold indicators
Stochastics 12.3.3 or 14.5.5 crossover
Wilders RSI 5 or 14

Relative Strength
Comparison to its index
Use stocks that have made an
extended move
Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

Candlestick Books worth


reading
Stephen Bigalow @
www.candlestickforum.com
Profitable Candlestick Trading
High Profit Candlestick Patterns

Steve Nison @ www.candlecharts.com


The Candlestick Course
Beyond Candlesticks

Greg Morris @ www.candlesexplained.com


Candlestick Charting Explained
Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

Books and more Books


Author

Title

Van Tharp Trade Your Way To Financial Freedom


Alexander Elder Trading For A Living
Alexander Elder Come Into My Trading Room
Benjamin
Graham The Intelligent Investor
Jack Schwager Market Wizards: Interviews With Top Traders
John Murphy Technical Analysis of the Financial Markets
John Murphy The Visual Investor
Mark Douglas The Disciplined Trader: Developing Winning Attitudes
Martin Pring Introduction to Technical Analysis
Martin Pring Breaking the Black Box
Steve Achelis Technical Analysis from A to Z
Thomas
Bulkowski Chart Patterns
New Concepts in Technical Trading Systems Most
J. Welles Wilder reference book in all TA
Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

Seminars
Stephen Bigalow none better
David Elliott @
www.wallstreetteachers.com
Kermit Prather @
www.tradingourway.com

Copyright 2007, TradingOurWay,


Prepared by Kermit Prather

CRUISE to the Panama Canalon CARNIVAL LIBERTY


Set sail April 12, 2008 for 8 glorious days!
8-Day Western Caribbean
Ports of Call Include:
Port Everglades, Costa Maya,
Puerto Limon, Colon

You will learn

Inside Stateroom - $687


p/p
Oceanview Stateroom $807 p/p
Balcony Stateroom to:
$1057 p/p
BOOK by October 29, 2007

Plus, the Trading Strategies to do all of the above


Adjust your Trading strategy to market conditions

Seminar fee is $795


We had an Early Bird special of $495 that Expired Oct
IF you sign up today or within 7 days well honor the $49
Use Promo code FTL110407, good until 11/12/07

http://tradingourway.com/CruiseRegistration.htm or call Kermit Prathe


Copyright 2007, TradingOurWay,
Prepared by Kermit Prather

S-ar putea să vă placă și