TRICK CANDLES


There are two very tricky candles that I must warn you about. Both are part of the umbrella group. The first is the shooting star. The shooting star comes at the top on an uptrend and has a shadow twice the size of the real body. The thing about the shooting star is that it opens near the bottom of the candle goes up to create the illustration of a strong bullish candle, quickly turns on you, and closes near it's open. It can be bullish or bearish, but a bearish shooting star is stronger and more likely to create a reversal than a bullish shooting star.

A shooting star happens when the bulls are running strong with the ball , and it looks like they are going to score when the bears come in and slam them at the last minute. Many times the bears take over then run the ball the other way.  Sometimes there is a fight and there is a sideways standoff for a while.

The hammer is the other trick candle that you want to be aware of. A hammer come at the end of a downtrend and will mislead you with the idea that it is going to continue in a bearish fashion before price turns traitor on you. It is called a hammer because it looks like a hammer. A hammer opens near the top of the candle, falls strong before reversing on you, creating a lower shadow that is twice the size of it's real body . When you see a hammer form, it is a sign that you need to protect your profits.

The thing that is detrimental about the shooting star/hammer is that if you enter either before it closes, you will more than likely find yourself on the far end of the WRONG SIDE of the trade. If you are using candles as trading flagships, always let them close before you jump into a trade. Impatience in the face of either of these candles will break you fast.




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2 comments:

  1. hi Traders Friend.
    This is an eye openner. Thank you and i want more of this.
    Nonhlanhla Jama
    SOUTH AFRICA

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  2. Good video, TF. If using candlesticks one should always wait for closing of the candle, that is when pattern is complete. The higher the time frame- the bigger importance of candle pattern. Since you used 1H chart in presentation (time frame I use extensively) hammers and shooting stars often happen during news releases. If that is the case, following trend has higher chance of being strong, as opposed to hammer/shooting star appearing without a "reason". Institutional money normally flows with fundamental announcements. Like your videos. Cheers!

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