Reading Candlestick Charts Was HARD Until I Learned This 3 Step Trick

if you've been having a hard time reading Candlestick charts this episode is for you I remember a time when I was getting started when I looked at a Candlestick chart and I said to myself I don't see anything it's like I'm looking at a foreign language and it's true that this is a language this is the universal language of the financial markets and it doesn't matter if you're trading Forex cryptocurrency futures or you're trading stock when you learn to read Candlestick charts the right way you will see the subtle buy and sell signal that are

on every chart the reason most Traders mess this up is because they're over complicating it and they're looking at the wrong type of charts I'm going to clear all of that up for you in today's episode so we're going to go ahead and jump into the slide deck how to read Candlestick charts and I'm going to walk you through the three simple steps that I took that made finally reading Candlestick charts click now I struggled with this and the reason that I struggled was because when I was getting started as a Trader I had a

small account as many of you may have today and I felt like I couldn't afford loss I could not afford to make mistakes my back was kind of up against the wall just to give you context when I was learning a trade I was in my 20s I had a college degree but it was the Great Recession the economy sucked and I couldn't get a regular job and I basically had no savings I was running out of money and so I was in a position where I needed to make this thing work my goal was

to make $200 a day you know roughly a th000 a week 50,000 a year that for me at that time was was like a dream and I wasn't achieving it so when I was setting up my Candlestick charts I was doing everything possible to reduce my likelihood of what I thought would be loss and I ended up creating these incredibly complex charts I'm a little embarrassed to even show this to you this is an actual Candlestick chart that I was using at one point you can barely even see candlesticks they're up here on this top

panel there are more than 20 different indicators on this chart right now so step one I'm going to tell you guys fewer indicators is better and I'm going to show you which ones you should be using but the reason fewer is better is because when you have that many indicators it's it's literally impossible to check all of them before you take a trade and you can end up getting conflicting signals because you've got so many indicators you're trying to rely on so what I really needed to do to be honest was address that fear of

loss that was so deep inside me I was so scared of losing and one of the ways I was able to kind of break free from that was by beginning to trade with really small share size so when I would take losses they weren't as emotional because I made a mistake that a lot of beginner Traders make that when I first got started I was trading with big size and I incurred a few huge Lo well it felt at the time to be huge losses they wouldn't be relative to where I'm at now but but

at the time they were really big and it was so disheartening I was so frustrated I just felt like you know the world was ending if if I couldn't figure this thing out and so I was trading with this kind of like it was like crazy but it was like almost like Russian Roulette like every time I took a trade I was like oh God is this going to be the one and I had so much fear in me that I couldn't focus I couldn't see straight so I was adding all these indicators because I

was searching for the Holy Grail now some of you may have been on the hunt and not even realized it the Holy Grail so to speak is the perfect indicator that will always tell you when to buy exactly when to sell and you will never lose money man that would be awesome it would be awesome and I hate to break the bad news that it doesn't exist there is no such thing out there as a Holy Grail indicator that's never wrong and there's no such thing is a Trader that doesn't from time to time lose

money and just to inspire you you know just a little bit um and this isn't to brag it's uh just just to kind of put it out there though and show you this is $12.6 million of real money third party audited broker statements you can see it on my website if you want this is real money that I've made and I did it while being right only 68.6% of the time in other words I'm wrong 30% of the time and I'm still making money and that's because of course I've figured out how to have a

good profit loss ratio my accuracy is pretty decent and I'm choosing the right instruments to trade every single day but let's get back to these Candlestick charts so hopefully that's a little inspiring for you although I'll remind you that my results are not typical this is pretty exceptional uh hopefully it inspires you because for me one of the things that kept me going was knowing that there were other Traders out there that were making money you know if if everyone was losing 100% of people were losing it was like no but just the fact that

there were a few people out there that were doing well that gave me hope so you're telling me there's a chance okay so fewer indicators is better there's no doubt about that what I would say is these are the indicators that I'm going to encourage you to use okay so number one we're going to keep it simple we're going to use um moving averages and I'm going to use exponential moving averages and these are the ones I'm going to use the 9 the 20 and the 200 those are three exponential moving averages now the way

I set it up my 200 is in magenta my nine is in a kind of a gray color and my 20 is in blue so now let's jump onto the chart real quick and I'll actually show you these indicators okay so this isn't this is just a very clean example of a chart and if I full screen this I mean I don't really probably have to compare it to what you just saw because this is obviously much much easier to read I mean it's almost like the difference between a a very messy disorganized room or

you know office or whatever and something that is like clean and clear right so this is what you want you want a nice clean simple chart so we've got the nine exponential moving average here this is our fastest exponential moving average a moving average takes the average price over the X number of periods and so this is a nine moving average so it's giving you the average price over the last nine candles and going to move the fastest with price action this is the average price over the last 20 candles it's going to move a

little slower than the nine and this is the average price over the last 200 candles the 200 period moving average is is very well respected a lot of people use the 10 and the 20 and the 50 and the 100 I use the nine I actually like it just a little bit more than the 10 it's just like a little bit faster I like the 20 and I don't find the 50 or the 100 uh necessary they're just extra unnecessary indicators on my chart and if I'm not using them it makes my chart messy and

I don't need it so we've got three moving averages the nine the 20 and the 200 now the other indicator that you're going to want is your volume weight at average price so indicator number two is vwap volume weighted average price and this is going to be uh it's a standard indicator and I do it in an orange dotted line just like that now your volume weighted average price here just make that cleaner your volume weighted average price price is like a moving average except that it also factors in um the volume that occurred there

it is so this is actually in solid but you could have it either either in a solid line or a dotted line whichever one you prefer so this is factoring in the amount of volume that occurs at price and the volume weight moving average um volume weight average price is the equilibrium point for the day so it is the exact average price PR for the period of the day so if the price is above average it's bullish if it's below average it's bearish so as a very simple way of thinking about it if something is

below um the volume weight average price the Bears are in control if it's above the Bulls are in control and generally as a long biased Trader I'm going to focus on trading when the price is above vwap so down here we dipped below it just for a moment and then the Bulls uh regained control and it got back above it all right so we've got our 9 EMA our 20 EMA our 200 EMA our volume weight at average price then of course we need a volume bars so number number three volume bars and volume bars

have to be colored based on the close and open of um the candles so you cannot have volume bars for instance that are all the same color this would be a mistake these are our volume bars right here and what we're actually going to do here um I'm going to go full screen this just the volume bars and I'm going to demonstrate for you how important this is if these were all the same color what we would miss is uh it would be hard to understand sentiment so I'll just make them all the same color

here just for a second uh and just kind of show you what this looks like oops okay oops this way all right so if these are all the same color all we know is that we've got a lot of volume but I can't tell from this where the price is going can you I would imagine you can't it's impossible now let's add um for growing volume we're going to change this back to green here and even if you didn't make this one red you of course know the inverse is going to be red so now

this is painting a picture what this is telling us is on these candles right here we certainly had high volume kind of out of nowhere high buying volume came in what this is communicating is the imbalance that's occurring between buyers and sell so during this period of time right now who's dominating just based on the volume profile the volume profile is telling us that the buyers are dominating so we can almost certainly assume that the price was moving up we probably moved up here we pulled back for a second we moved up more we pulled

back again we moved up a little bit we dipped down maybe a little higher dip couple red candles so dipping down a little bit more maybe coming back up for a second and then going into a little bit of a period of pulling back we start to pop up for for a second and then we kind of pull back again all right so now let's pull up the chart and see how that lines up okay so you could actually almost trade exclusively on volume bars without Candlestick charts at all they're that they're that significant and

likewise to trade without volume bars you would be almost trading with one eye closed because while the candles are moving up it's very important to understand the volume profile because this gives you context so let's just say for instance that the price is moving up so we're going to do some green candles here let's just say that the price is moving up U but the volume is declining those are the volume bars and then when you have a red candle here let's just imagine that the the selling volume is like this what story does that

tell the imbalance is clearly to the sell side while there were buyers they were diminishing and then when the sellers came in they Di what about the inverse volume increasing as it's moving up and when it pulls back light volume now this is the information that we need in order to make an accurate prediction at what's going to happen next the traders who can predict the future the best will be the ones who make the most money and what we're doing as Traders is we're getting really good at pattern recognition now what I struggled with

as a beginner was that for one I couldn't see the patterns I couldn't see the the trees through the forest because I had so many indicators on my charts I couldn't see the patterns trying to visualize patterns the SLE patterns of an indicator is the problem is the indicator is a derivative of the actual price so I don't know a really good analogy for it off the top of my head but to me it makes a lot more sense to pay attention to the price it's almost like trying to do everything like looking in a

mirror looking in a reflection it it like just look at the actual Source because that's where you're going to get the cleanest information so the source is here the candles the indicators provide context and that's helpful but you can't only have indicators when you only have indicators you can't make accurate predictions because the best patterns are going to occur on the Candlestick chart itself and then what you're going to do is you're going to use these indicators your moving averages your volume weight average price your volume and then this one right here which I'll talk

about in a second you're going to use these to help you essentially validate that this is doing what you think it's going to do okay so in this uh case right here the prediction changed significantly based on the two volume profiles so we'll do a second version right here um where we have decreasing volume as we go higher and then we have these candles here with high selling volume so now if we start to make a move back back up I would predict that the buying volume would be very low and that we would end

up at best double topping at the high of day with this being resistance for a move back lower and at the worst it wouldn't even make a new high it would just keep going lower and lower and I certainly would not be buying dips or pullbacks in this area here thinking it's going to move higher there's no way I would do that on this chart on the other hand if we're pulling back right here and that's our 9 moving average and then our 20 is down here and our V app is down here a little

lower I would look at this and I would say I should be a buyer near the support of the N9 moving average right here the volume profile tells me there's an imbalance to the buy side if I buy right here near support I can set my stop at the low of this candle right down here and I can add as the price moves higher and this is a chart where I would expect to see strong resolution to the upside now this is an example this is a real chart and this is a real stock that

I traded and I'll show you the p&l that I had on the stock um a little bit later in this class so we have our first move up here on high volume nice volume we have a momentary pullback and then it pushes even higher we have here a little bit of a more proper pullback and again look at the volume profile nice high volume buying as it was moving higher and then a light volume candle right here that's red it dips down for a second and this is the spot to be a buyer right down

here while you certainly could buy as the pattern comes back up to the top you could also be accumulating right here on this pullback because the volume profile is supporting the belief that this is going to move higher the buyers are in control and when buyers are in control the dips get bought up and the price moves higher it pulls back again buyers are still in control and the price moves even higher now the four indicator that you're going to see uh is on my charts is the macd so the macd macd stands for moving

average convergence Divergence indicator and this is an oscillating indicator so it goes like this and it has a signal line that goes like this and what I do with this indicator is uh I I focus on trading when the macd is above the signal line so you've got your signal line here which is orange and then you've got your your macd which is the um which basically what this is doing is it's taking the moving averages and it's telling you when they're uh converging or diverging so here the moving averages are diverging they're moving apart

right do you see how those moving averages are moving apart they move apart when the price is moving quickly the price moves quickly the moving averages pull away from each other when the price starts to contract and come back together the moving averages converge and during the bare Market of 2022 and then the rally in 2023 I found that by only trading when the macd is open that greatly reduced the number of false breakouts I had so this is an indicator that is helpful to look at as you know sort of in a way Red

Light Green Light if the macd is positive above the signal line I'm interested if it's negative I'm not interested and so on this chart right here when that crossed over you know right at this point that was the place where I would say nope I'm not interested anymore now you know you could create kind of a complex overlay like this and you know you could it make it very easy to not miss it but unfortunately when you start doing this it's very easy just look at how much Messier this chart looks it's not easy to

see and what you don't want to lose sight of are these clean simple patterns right here because this really is going to be where you're going to find the most success so Step One is simplifying your indicators you can see on my chart how simple it looks it's just not worth over complicating it so you really want to keep it simple this is what my charts look like and this is what it looks like whether it's a 1 minute a 5 minute a 10c a daily chart they're the same I just keep it really simple

okay so now let's pull the slide deck back up here for a second all right so step one is fewer indicators is better step two is focusing on what is obvious this was a huge mistake that I made when I was getting started when I was getting started I wasn't focusing on what was obvious my problem was that I started focusing on stocks that I knew and now it doesn't matter whether you're trading futures or Forex or you're trading cryptocurrency you you want to trade what is obvious so let me just pull the charts back

up here and show you an example of what I mean so on this particular day I would say without question this was the obvious stock to trade it ended up going up 100% it had news it was on my scanner right here I saw it when it was up like 69% these are scanners that are searching the market for stocks that are moving but you can use scanners like this for um commodities for Forex Pairs and for cryptocurrencies as well now the problem that I got into is that I started trading things that I knew

so I'd pull up a chart on IBM and I'm like I know IBM computers and I'd start looking at this chart and I this is what this is when I said I don't see a gosh darn thing I'm looking at this chart and it's just I got nothing I pull up a chart on us steel x this is a company that I was familiar with I see nothing I pull up American Electric Power this is another stock that I had for a while that I focused on on a lot oops a pulled up American Electric

Power I got nothing this thing makes you know I I I just don't see anything here there's not clear patterns and this was the biggest mistake that I was making I was trading things that I was familiar with I was not trading things that were actually volatile or worthy of my attention on that particular day by the way if you want to download a PDF of my strategy it breaks down my crit for finding the best stocks to trade and where I'm getting in and what exit indicators I'm using to tell me when to get

out you can download the PDF it is linked to the top comment I pinned it and it's also linked in the top of the description so make sure you download it print it out and start practicing trading this strategy in a simulator of course this is the strategy I've been trading for more than a decade it works in today's market so I would encourage you to study it as much as possible and see if you can find Success With It because it's incorporating everything we're talking about in today's episode so here was my reasoning I

had heard some people say you should get really good at trading like one or two stocks get really good at trading like apple for example or the S&P 500 and some people do this with with Bitcoin or with gold just get really good at trading you know One Financial instrument once you start to kind of learn its patterns you'll start to get comfortable and you'll get better at it that was not true for me that was never true I wasn't able to actually get dialed in and and to be honest I think it's kind of

a myth because now with more than a decade of experien trading full-time I don't know any traders who actually make a living trading like that I've known a few people who were very wealthy who bought positions in some of these stocks like Tesla or apple and would kind of trade around them sometimes they would buy more shares on one day the price would go up they'd sell them but if the price went down they would just keep holding them because they believed in what they were buying and that's not really day trading and to be

honest for Traders like myself who are getting started with small accounts you can't afford to do that so I it just didn't make sense so this was the big problem for me is I was not trading what was obvious so what is a better way to define and help you understand what is obvious what I look for is high relative volume so let's define what that means some of you may be familiar with this phrase uh others are not so we're looking for uh the abbreviation is just Rel RV for relative volume and what I

have found in my metrics is that I make the most money when the relative volume is five times higher than its average and I can actually back this up with um with this $12.6 million in in profit so we're going to look here uh let's see what it is um it's under is it under let's see under instrument okay so we're going to pull this up um what we're looking for here oh no maybe it's stay oh let's just check no it is here um so performance by instrument relative volume right here so this shows

over $10 million of my profit came from stocks that had at least five 500% higher which is five times higher five times higher relative volume relative to the 50-day average and then the rest for the most part was on uh stocks that were between 150 and 200 but in fact look at this these are losses when I'm trading stocks that have lower relative volume that's very interesting now what what is this what is this essentially telling us the reason that I'm making money on stocks I have High relative volume is because High relative volume is

a byproduct typically of a news Catalyst when you have breaking news and you can have breaking news and a day where Bitcoin is really hot or a day when Apple is really hot it'll usually happen like four times a year when they're putting out their quarterly earnings at least in the case of stocks but there can be Global events that create a catalyst for futures for future commodities for gold things like that for Bitcoin and currency pairs so whatever it is you need the Catalyst the catalyst is what's going to create that high volume so

now let's look at this chart in a little bit of a different way we're going to move this out of the way um I'm going to look at the daily chart here on American Electric Power and if we look at the daily chart and we just look at the volume you could see a few days here that have higher volume here a little bit here a little bit here a little bit here so these would be the days that have that it has higher relative volume even in spite of that the relative volume ratio these

these Peaks are maybe twice the average they're not that high this one's a little higher but but they're really not that high let's look at Tesla so we're going to look at the volume Peaks on Tesla there aren't many Peaks it has sustained high volume but the relative volume is not particularly High except back here this day was very high volume okay so that day right there that's a day that I would say okay maybe we could consider trading it on that type of day when you have you know significantly higher volume let's look at

the S&P 500 for those of you that try to trade the S&P every single day when does the S&P have high relative volume basically never let's get real this is the S&P 500 this doesn't have a usually single days with crazy high volume you had um in March of 2020 when the market dropped 30% that was that was the highest pretty much relative volume Spike that I had seen and and so on that particular day yes and in this sort of stretch these two weeks this was an opportunity if you really wanted to trade the

S&P 500 although what I'll say is that there were individual stocks that were even more volatile that are within the S&P 500 that were driving this move that would have been better candidates for trading so on any given day you're looking at these large cap stocks American Electric Power us Steel on mobile whatever these are not volatile enough occasionally you'll have higher relative volume but even when you do more or less the price action there's nothing here to look at so it made sense when I said I'm not seeing anything here because I was focusing

on the wrong stocks to trade now for me getting focused on the right stocks to trade the ones that had the five times higher relative volume this only came after a really big loss that I took that blew up my account well it put my account so I had to deposit more money to keep trading the the account wasn't negative which could be if you have a really big mistake but in any case I had to add more money to my account and so During the period where I couldn't trade until I had to add

more until I added more money I went through all of my metrics and that's when I began to notice this pattern what I was trying to figure out was you know okay I've been doing this for 18 months where are my winners where are my losers what am I doing right if anything I mean I was feeling pretty defeated so I wasn't sure I was really doing anything right but I looked through my metrics and this is what I noticed my profits predominantly cons consistently most consistently were when we had high relative volume it was

also when the in the uh instrument was up more than 10% okay so the opening Gap uh being more than 2% but the instrument being up 10% so then all of a sudden it's like well wait a second this for me was a really big deal because when is the S&P 500 ever up 10% when is Apple ever up 10% never never I mean not in one day it doesn't happen so then all of a sudden it was like wait a second so then what where am I making money and again this is these are

real metrics from Real Money trades and my hope for you is that by looking at this you're able to sort of understand the anatomy of the strategy that I'm trading every single day and it's a strategy is working in the market today so my performance is predominantly on lower priced stocks while you'll see that I do have some that are higher price Gamestop right you know I traded that when it was higher price and a few others um predominantly my profit is under $20 between 2 and 20 that's really my window where I've got the

most profit so I was like okay well so we know we're looking for a relative volume of at least um five times higher we know that we're looking for so this is number one number two we know that the price needs to be up 10% number three all right we're looking for um a catalyst because the catalyst is what's creating the interest that's what that's what drives the move that's where the relative volume starts to move up it doesn't move up if you don't have some type of catalyst right and then let's see we'll get

out another marker number four we're looking for price between 2 and 20 right so now we're starting to get a little dialed in this is how you start to build a strategy right this is how you build a strategy you've got some parameters and now I can start searching the market every single day for stocks or Commodities you know or currency pairs it wouldn't matter that meet these parameters for being worth considering okay so let's see so let's back this out here for a second all right so um let's see we're going to jump back

over to here so I'm using my scanners to find this all in real time so these are these scanners are actually searching the market they're scanning the entire market and then what I do once I see something that's on my scanner like I did right here in the case of WIA is I say well what's the Catalyst what is driving this move I see that we've got news on it jumps on announcing fourth H HDTV PTV license with major TV brand okay so that's the Catalyst now I don't have to be an expert on this

stock I don't have to be an expert at this industry all I need to know is that there's a news Catalyst the price is up 10% we've got high relative volume the price fits within my wheelhouse of 2 to 20 and from there it's game time all right so I pull up the chart and boom nearly $10,000 right here trade trading this move up so I know that this for some of you guys who are newer you know you're like I don't even have $99,000 in my account I don't even have 900 in my account

so I'm not going to have $9,000 winners anytime soon fair enough but to inspire you and to show you someone who's been doing this for a while is able to extract this kind of profit from this kind of move I hope will help you get focused on trying to find these setups in your own trading and get really good at reading these charts so what we really want to be doing is making sure number one we're keeping our indicators very simple number two we're trading what's obvious and number three you want to build a strategy

around what's working so you want to throw this out right here this is way too complicated this is obviously not where you're going to find success and you want to lean in on trading these types of patterns where you're seeing good resolution so this again it's just a screen grab uh from a day where you know up 3500 uh on the day total but look at the patterns here now this is a little higher priced which made it a little riskier for me but look at this move from 36 pull back up to 40 pull

back up to 50 that's really clean you know you see a chart like that and you're like wow I mean yeah that makes sense I want to be buying this pullback but again we're only buying that pullback when the volume profile checks out when the macd is open right we still have to check our indicators we got to make sure all of our indicators are checking out before we're taking that trade but if everything checks out then that's where we're going to step up to the platee we're going to say all right I'm going to

jump in here I like this setup so this was um this is another example here you've got one two 3 four candles moving up we've got high volume green candles green bars this is preferred sort of a light volume pullback right here we dip back down the first candle makes the new high and for me that's the moment where I'm a buyer so the way I think of these um charts and I think of this because it's what's happening is I think of these waves so if you think of a wave coming in you first

get this move up and there are some people who are going to buy down here and just jump in but to be honest the Candlestick chart's not supporting that entry you know people who are buying here are kind of chasing the move and you'll have people that chase the move and that's fine people can do as they'd like but that's not really a good setup I like to wait for that first wave to pull back a little bit and this is the moment of truth because this is where the volume profile is going to either

tell us high volume selling this is when the macd is going to cross over we're going to break below our moving averages or we're going to hold and if we hold then at that moment I can now visualize the rest of the pattern I know what's coming next so now what I'm looking for is the moment that the wave sort of shifts so if you think of the tide coming in the wave going out and then you're looking for that next wave to come back in so the way I do this is I'm looking at

my indicators I'm looking at my chart and I usually in this area here while we're still selling off actively I'm starting to think okay macd is open the volume profile is acceptable I want to start looking for an entry and what I begin to look for is the first candle to make a new high so we'll actually draw it on this side so when we're talking about first candle to make a new high uh this is something that is so important for timing these waves so we've got the price moving up and then we've got

the dip back down right here and the second we have a candle right here that breaks the high of the previous candle that's where I'm getting in so something that we talk about a lot is candles is making new highs see each of these candles are breaking the high of the previous candle that's the high of the previous candle right here that's the high it broke it that's the high it broke it that's the high it broke it that's the high so the high of this candle breaks it right and then when we're pulling back

candles are usually making new lows see how these candles are making a new low a new low a new low now if it keeps making new lows I'm not going to buy I'm not just going to get in down here I'm going to wait for the first candle to make a new high right there now these patterns the way uh these types of stocks trade is they're they can be very clean early in the move new High new High new High new low new low new low new High new High new High new high and

the reason they're like that is because there's a catalyst that's driving the volume if there wasn't a catalyst driving the volume you wouldn't have it but when you have a catalyst you have new that's pushing it higher pushing it higher pushing it higher pushing it higher and honestly let's just ask ourselves what's the first candle that actually made a new low it's not until all the way right here that was the first candle that made a new low these pulled back but they didn't actually make a new low and then this right here none of

these made a new low the low of that candle that red candle this one was not as low so we had one candle that made a new low right there and then and we didn't have another one until right here two candles made new lows in that whole stretch so if you bought at this first candle that made a new low I mean you wouldn't want to buy but but basically you bought because you said okay this is the wave this is the first wave it dipped down and then as soon as that next candle

makes the new high that's where you're in so basically right after that candle made a low that's going to be your lowest risk entry and the reason that's the lowest risk entry is because where do you set your stop loss where do you bail out if this doesn't work the low you bail out at the low right there so now this is where you start to get dialed in because you're thinking I'm getting in right here my stop is right here let's just say that's 10 cents a share now if I can make 20 cents

a share on this position I'm going to have a 2:1 profit to loss ratio right a 2 to1 profit to loss ratio means if you're right even just 33% of the time you're break even that let your break even 33% if you write half the time 50% you're profitable now if you had a 1:1 ratio 10-cent winners 10-cent losers 50% would be your break even you need to be a little higher to be profitable okay now as you saw from my metrics my accuracy is about 68% and that's produced 12.6 million in gross profit okay

so you see how this comes together it's the combination of profit loss ratio and your accuracy that creates profitability so what you're looking at here is is let the first wave happen let it move up and then look for that first dip back down that first pullback candle makes a new low and then right after that the first candle that makes a new high that's where you're a buyer again as long as your indicators are supporting it these are the only indicators I'm using right now and I only recently added macd so for a long

time I didn't even use that but in a bare Market in a choppier market I found it helpful so I've kept things really simple for a long time and I've done well as a result you don't need to over complicate it so you let it squeeze up you let it pull back and then you're getting in on that first tip now one of the challenges a lot of beginner Traders have is they'll get in right here and then they're going to sell right here they're like I'm out I'm selling and then they watch this thing

you know squeeze all the way up you know to way up here something like that it just keeps moving higher and they're like well holy smokes I so right here for a tiny profit meanwhile this thing went like way higher you could have had like a 5: one profit to loss ratio but you sold early with a one:1 ratio you do that too much what you're going to do is you're going to set the bar higher than necessary for you to be a break even Trader so here's what I would suggest you're going to have

that instinct to sell I had it myself why did I have it I had a small account as soon as I had a winner I was like boom I got to get out of this trade I don't want to overstay my welcome I don't want to lose it fear of loss right so once again that fear of loss creeps back in and it's telling me to bail as soon as I've got a little profit sell because the sooner I sell the sooner I've locked it up and made the win are real and it's not going

to turn into a loser so here's what I started doing I set up hot keys on my computer so I have these um and I'll show you just show you here just for a second so you could see here so these are the keys that I use and the way I have it set up is um shift one is to buy and contrl Z is to sell my full position and this is selling at the bid contrl X sells half of my position at the bid contrl C sells a quarter of my position and so

what I did was I actually took away the sell the sell full position I changed the script on it to only sell half my position because my instinct was to bail out when I was up just a teeny amount I said the only thing I I need to just start you know rewriting that and so when I have the urge to sell the whole thing I'm going to change the script on that button so I'm only selling half of my position and that was a real game Cher for me cuz it kept me in my

position longer at least half of it but at the same time it sort of did give me that little bit of gratification that I needed of like locking up a small winner and after I've sold half I adjust my stop to break even on the rest of the position so now I have guarantee that this is going to be a winner now eventually I got better at not selling half until I saw an exit indicator so what do exit indicators look like when we're looking at a stock chart and we're looking at these candlesticks the

exit indicator is the first candle that makes a new low so if you've been holding this whole way up and you and you didn't sell any of it then as soon as you have a candle making new low that is an exit indicator because at that point you don't know how much this is going to pull back now as it turns out selling down here wouldn't have been great and you would have actually gotten right back in a moment later but as a beginner Trader you have to have a set of rules that you follow

and so you hold until that first candle makes a new low now what some Traders will do is they'll scale out selling half or a quarter scaling out a little bit into profit and there's nothing wrong with doing that especially when you have big green candles like this cuz you have these kind of big green candles it if you don't sell until the first candle goes red well now this is kind of a a large amount that you ended up giving back as it came back down so that's when you do want to start taking

profit into a move so when I first get into a trade what do I want to see number one I want to see that when I first get in if I'm getting in down here right if this is my entry right there what are the things that I want to see so let's list them out with a marker that's working well so number one I want to see the price move up right price should move up obviously if I timed my entry correctly and I got into the first candle make a new high the wave

is already moving up so I should be getting in here and the wave should just continue higher so that's not a big ask for the price to move up should it move up I you know I would say at least 10 cents within one minute of entering the trade just to quantify it a little bit more so like it should move up pretty quickly number two I want to see um buyers on the time and sales which would be in other words green on the tape so when we're looking at the level two we want

to see we've got the bid on the left we've got the ask on the right so you've got something that's like 550 by 560 let's say and then you have your time and sales window usually right next to it and this is where what we want to see is a bunch of buy orders going through 560 5 65570 green on the tape we want to see a lot of buyers okay these are the two things I absolutely want to see I'd also like to see large green candles okay large green candles so now let's inverse

that we'll invert it so if I want to see all of those things in order to feel good about a trade in order for me to see an exit indicator a reason to sell a reason to sell would be I get in and the price is not moving so if I got in right here and the price doesn't go up 10 cents in a minute I'm going to get out if there are not any buyers or green on the tape I'm going to get out if there are not any large green candles I'm going to

get out and what might happen just for instance is I'll have an instance where I got in and then the next candle goes red and I get right out now this would not be typical if we had a good volume profile and if all of our indicators checked out but the fact is my accuracy is 68% of the time so 32% of time I'm going to be wrong I'm going to have the right idea but you know I'll be wrong and I just have to cut my loss quickly but if I get in and the

price moves higher moves higher moves higher and then up around here let's say right around this area the price sort of stops moving we stop seeing buyers on the level two we start seeing red on the tape or we start to see the formation of a red candle those are exit indicators so we start to get a small red candle up there right that's NE indicator the price is now moving down we now have sellers on the tape and we're having a a red candle it's the opposite of a green candle so sometimes what can

be helpful is when I think about everything I want to see for this trade to work I then invert those and those are my exit um exit indicators so my exit indicators here are essentially when I'm not seeing all of the things I need to see for the price to be moving up that has been really helpful for me now if you had the discipline to not sell until you saw an actual exit indicator you would do really well because most Traders including me a lot of the time sell too soon and when you chronically

sell too soon unfortunately you're capping your upside profit potential and the fact is what a lot of Traders do when they get into a trade that doesn't work they get into a trade it's a losing position well they don't sell too soon they just keep holding so let's just say you had um a chart like this you had a nice move up you had a little pullback here and then you have one of these candles where the price goes up um and then it comes back down so when you have one of these you got

in first candle makes a new high it squeezes up and then it drops back down you didn't sell and then the next candle goes red and it breaks the low now there's a lot of traders who just keep holding and now you're looking at this and it's like you're stair stepping lower you made a new high but it rejected for whatever reason it rejected and the fact is all your technical indicators could check out but there's some guy you know some guy in his stupid office in New York City who has a big sell order

up here for 100,000 shares and this guy just ruined the chart it could be one one order one Insider whatever it is he's got that giant cell over there he's blocking the way so okay whatever it happens chalk it up as a loss or get out Break Even or even for a small winner if you're in at a good enough price but do not just continue holding but a lot of Traders do this they'll keep holding and they won't just sell half they'll hold full size all the way down they're going down to the ship

and this is a problem because what this does to your profit to loss ratio is your average losers are big because you're holding full position down 50 cents a dollar a share or more but whenever you have a 50 Cent winner well you sold half when you're up 10 cents so now even if you sell the other the rest of it up0 50 cents your average winner is still only you know 20 cents or whatever you sold halfway too soon that's the problem so again if you're selling half too soon change those hotkeys change those

orders so you're scaling out more slowly into the move and try to teach yourself if you can not to sell until you have a valid exit indicator again success when it comes to reading Candlestick charts can be simplified if you just focus on using fewer indicators focusing on the best setups and building a strategy around where your metrics are showing you have success if you want to download a PDF of the strategy that I'm trading every single day it's pinned to the top of the comments and it's linked in the description you can download it

you can print it out you can use it in your own trading and practice it see if it works for you because this is a strategy I've been trading now for more than a decade fulltime so if this episode was interesting and helpful I hope you hit that thumbs up I hope you subscribe to the channel and I'll see you for another upload just like this real soon