Welcome to Module nine, part two of free. In this video we will continue to look at reading a chart specifically focusing on price movement and candlestick patterns. So, as you're probably aware, markets do not move in straight lines, but rather in what can be referred to as waves of zigzags, testing and in retesting previous highs and lows. These waves usually consist of two movements, which are called impulse moves, that is your larger moves in the direction of the trend and your smaller correction moves. Those are usually counter trend movements that can be considered pullbacks. Just looking at every simple explanation.

In the uptrend, what you would usually notice is that your impulse moves would be your larger moves in the direction of a trend for instance, this represents an uptrend, so ever, you'd have a larger impulse move a smaller correction move or a pullback. Larger, impossible small correction larger impulse moves. Now what you'd find is in a strong uptrend or trend, you'd find that your impulse moves up very steeply inclined. And as the trend weakens, you've noticed that your impulse moves start to flatten out. So as your train starts to weaken, you'd see that your impulse moves would start to flatten out. And here's just an example of a downtrend.

As you can see, you have your impulse move, pullback, correction, impulse move, pullback, as correction in your impulse move again, which is the longer move. And when we get to our other modules, we'll have a look at some of the wave theory, including Elliot wave theory that actually tries to help us understand how these wave patterns are created. Looking at price action, price action in my opinion can be defined as the behavior of price over a specified period due to opposing forces caused by buying and selling activity. The result is a trail of activity that can be analyzed and interpreted to indicate the strength and motive of both buyers and sellers at a particular price level or price area. If interpret correctly, traders should be able to position themselves favorably to benefit of the current momentum and the resulting price movements. Now the most popular method of reading price action is using candlestick analysis especially at major support and resistance levels.

Let's look at a candlestick anatomy. So candlesticks as discussed in Part one is can be found on your a your candlestick or bar chart and Looking at a bearish candle, you'd notice that open would always be above the clouds, or in other words close to be below your open. So here's an example of a bearish candle. So you have your open at this table over here, and you have your flares at a lower level around here waver and your I would be the highest point reached and your lowest point would be represented by the bottom week at the lowest bottom of the candle, and the top weeks are usually called your upper or top week and also referred to as shadows, both top and bottom because your lower shadows are referred to as your weak or your bottom shadow. As you can see with a bullish candle, you have a close that sits above you're open to looking at out interpret different different elements of a candlestick.

So weeks going back to this is your weeks and weeks tell us that price was rejected in other words, the price is kicking away from that label. So, you have rejection from a label so it is showing you prices being rejected away from that high or that low. The weak link indicates label for rejection. So in other words, a longer week will equal a stronger price rejection. The Body Body as you can see is that for a year has passed between the open plans. Now the body and tells us whether the buyers were happy the booze or the base, your sellers or temporary in control of the price direction for the time unit that is being represented but that bar, the body to wick ratio that is The spot you open and close compared to your weeks, the ratio they will tell us how strong momentum is in a particular direction.

And if we have a very small body with large wicks on both sides sides this would mean that we are at the level of indecision with buyers and sellers fighting for control. If we have a large body in very small weeks, it will signify strength, and otherwise it will not very large rejection of price and your clothes were able to get closer to the high of that candle. I'd like to show you the life cycle of a candle. So what's going to be represented here is 60 minutes worth of price action divided into 10 minute intervals. So each candlestick will represent 10 minutes. In other words, we are basically looking at the data minute timeframe.

So when the price action starts out, you'd see these open. This opens right here at the stage. And in off the teammates, we have a strong push by the bulls and in an upward direction. So we've reached this nice high level up here. As you can see, we don't even have any pullback. So the price is closing right at the top so very strong bullish momentum.

In you can see we have some sellers base coming in at that level and it pushes the price right back to right above the opening price. So we slide in we opened but we're sitting with this huge price rejection here. What we can see happening now is that even more sellers are coming in and they are pushing the price even further down way below the opening price. That's why Paul is going right over here. So we have we have your buyers and your sellers in control. However at this level we see your boost coming back and some buying pressure is appearing so we have you bush was pushing price back up so below the the opening label as we can see.

So based on control but boosts coming back in. Now we have more buyers coming in and pushing the price back up above the opening price. That's why we have a green bar Now again, and then in the final image CBF some more sellers coming in and pushing the price back to the same place with opened. So we sitting with this strategy. So what I'm trying to show you here is that even after 60 minutes of price action, what we ended up with was a high I be reached at this point as you can see over here Low being reached at this point that happened over here and then at the end of the day we just closed we opened. So, this whole 15 minutes worth of price action can be boiled down to the scandal of the year.

Looking at some of the candlestick patterns, we have your spinning tops and you said the candlestick to be so now in the candlestick lifecycle here is called doji and that is basically a neutral pattern. So what this saying is that your base and your boobs are in equals equal strength at this stage and everybody is really winning. And we are closing a right way we opened your spinning top is similar in that we will see your body and large and weeks and both sides that's what they're calling the spinning top. Whereas the difference is that you might see your close either slightly higher than your open or your close slightly lower than your open resulting in either green or red candle. However, what is indicated here is that nobody's really having the upper hand here and this is considered a neutral pattern. So this is not really showing us anything other than the morphus just still trying to decide which direction to move into.

Looking at amis also known as spin balls. You have your basic Polish hammers over here. As you can see that we have your price opening at the top level because this is a read for you. You obviously have your price open at the top day. And what we saw is that price was probably pushed down way to the bottom. Oh, Be here.

And then buyers came back in push the price right back to the top, we're almost closing back at our opening level. So we have large price rejection from the bottom. Yeah. Same with the hangman or the candle here. As you can see we opened at this point over here, and we base them in push the price back to this level, creating a low and then our boss came back and push the price right back up and closing even higher than we opened. So both of these are considered them bullish candles.

And that is due to the large price rejection. And obviously this one would be considered a bit more bullish and because we have a close above the open but both of these are considered bullish candles or inverted hammers. Here's two examples of those. We have your price opening price going up to this level. sellers coming in pushing the price back creating this inverted hammer. Although we have a price with a closing price higher than the opening price is still considered bearish as we have large price rejection and bass are currently winning.

Similarly, yeah, opening price up here creating a hot new high and sell is coming in and pushing the price lower trading red candle. So again, both bullish candles, both bearish candles irrespective of the color and that is due to the price rejection. So what we can see is large wicks at the bottom, basically almost no weeks and at the top that is going to be bullish and the inverse version of that would be bearish. We have large price rejection at the top of last week's aneuploidy at the bottom. Another variation of those are called your dragon fried doji or your gravestone doji, whereas a dragonfly doji. You have your opening and your closing price.

On the same label with a large wick at the bottom at the bottom shadow that is very bullish. Whereas your gravestone doji and you have the opening price and the closing price also at the same level and that large price rejection coming back pushing it down and that is considered bearish. So, to conclude here we have British hammers nine men, your bearish inverted hammers and then your bullish dragon for doji and your bearish crest and doji looking at engulfing and piercing patterns, so a British engulfing pattern is where you have a red candle that's forming in other words here to close below your open DBF on the next candle, we have the blues coming back and pushing price up to close above the open of the previous candle. So If that is considered, say, the top you need to have close above that opening level a beginner that is console considered a bullish engulfing pattern and will show that your eyes are in control temporarily.

And if you were to distill this back to one candle, what you'd usually see is that you have your open over here and have a large wick at the bottom in a close up. So what you'd see is this you see a green candle over here with a large wick, that is specifically if you were to distill this candle into a single candle. Looking at the inverse, the bearish version of this the bearish engulfing so you have a open opening price close closing that higher forming a green candle is coming in closing below the open and at the end that is considered your bearish engulfing so the beers canceling golfing the bullish candle the political contain all your bullish candles and coughing your bearish candle. So that is considered bullish that is considered bearish and a different variation that is your piercing pattern. So, you looking at a large bearish candle close below the open then you have your boos coming back and closing above the 50% area of the scandal.

So, compared to a engulfing pattern we will close above the open be closing above the 50% line Yeah, so that would be considered a piercing pattern is is considered a bullish pattern but obviously less polished in your position golfing. your your your bearish version of that would be your dark cloud cover as they say. You have your close above your open ended you have the base covered back and closing below the halfway mark on that bullish candle over here. So that is considered the bearish candle over this perished in their full bearish engulfing pattern looking at free line strength, so this is now we are looking at three different candle closes. Now the British version of the system called the free British soldiers and what you'll see is that you have free and green candles closing off each other. So, what we would be looking forwards you're looking for large bodies you will be looking for your clothes to be as high as possible to topics as for instance your CV do not have a large acid athleisure is very closely talking about what you can see us we do have large candles free lunch can have so this is a bullish pattern and price would usually continue of such a pattern event.

But you might see a slight pullback off of that, but again use a different example bullish candle bullish candle bullish candle and as you can see in this scenario you have them increasing the body is increasing in size of the each class that is a bullish pattern and looking at the inverse the bearish patient as it's called the free black pros you see a free large bodied bearish candles closing in So, that is the one is one example looking at an example again, free large red candles closing consecutively. So that is your bearish version of your free free black rats looking at pinball reversals, now these are all candlestick patterns that I use quite a lot and that's because they are very prevalent in most markets. They are quite reliable, probably one of the most reliable candlestick patterns to look out for. So your punishment for reversals, which is also called a Morningstar, and is usually try to indicate the bottom so you'd see prices coming down, you'd have a large red candle.

This is the first thing to look for. large green candle. Small body candle almost look like a doji. But you have a small candle here. Does it matter whether it's red or green? You can see this one is more red than green that one is actually green, but you have a small candle in a large bullish candle following that.

Now the British cannot be not necessarily have it closed above the open of that red candle. But I'd say you need it needs to at least close above the 50% or 50% label. Yes sir. That's what you Looking for obviously if it closes above the open that's pretty very bullish and is an example in red big red candle, small body candle and then the reversal. So you'd usually see the price continue or 10 at this point and looking at the opposite of that, that is the bearish pinbar reversal also known as the evening stone. You add at a beak you have an uptrend and you have a big green candle followed by a small body candle and in your bearish candle so use an extreme example we see that your bearish candle didn't even close below the 50% level over as you can see here, it actually does continue with a very large candle but but still as you can see the east and large wick so we are fighting for control at this point.

But again, this still forms the bar reversal as this that's actually called the pinball so yes, a big bullish candle small body candle in reverse on that usually continues to the downside is an example British candle small candle and bearish candle and then you have your continuation to the downside another example of reversal patterns is your tweezer top and a tweezer bottom now tweezer top as usually we you'd see that you have two candles next gen one bullish one bearish and are either going to be the is going to have large top wicks, which is usually considered tweezers as you can see it looks like to do tweezers and so they might have really large topics but it's a bullish candle or a rather long bullish candle followed by a big bearish candle. Yes a different example as you can see a large bullish candle small weeks in this in this example and then a big bearish candle and that is usually indicates reversal.

So this would be bearish. So we are looking for a bearish reversal at this point price going down yes that the opposite of that that is actually the tweezer bottom so we are looking for a bullish reversal so it's price going back up. So price has come down from a big bearish candle and see the two large bottom peaks here showing your rejections looks like it's pulling away from the price followed by a large bullish candle. Here's another example large bearish candle for the large bullish candle. So that is your reversal pattern that you can look for. I'm sorry, let's go back there.

And it's very important to never read your candlestick patterns in isolation, candlestick patterns any tell a story that is relevant to a particular timeframe, and is for this reason that it's important to read candlestick patterns in conjunction with major price levels as we'll be discussed in part three, along with support and resistance, it is also for this reason that candlestick patterns on a higher time frame would take preference over those on smaller timeframes. And that is because when you roll up your timeframe and that obviously changes the the candlestick patterns. So, if you have a bullish pattern on the, say one hour time frame and a bearish pattern on a on a five minute time frame, that would still mean that we are proof of gerado looking for a more bullish price action then perish. So, what you can try and do is similar to what I explained in the cows life cycles, which try to use your mind to consolidate multiple candlesticks into a single candle and then ask yourself what and price action is telling you.

So, that concludes part two of free and in our next video we will look at the final part of merchandise for free or free, so, as always if you have any questions you can feel free to mail them to me at info at FX automate.