Japanese Candlestick Pattern That’s Rarely Taught: This video (and article) will teach you how to use a rather rarely taught candlestick pattern and its fundamentals that can tremendously boost the win/loss ratio of your trades.
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Japanese Candlestick Pattern That’s Rarely Taught
Welcome to this video about one of my favorite candlestick patterns. It is a Japanese candlestick pattern that doesn’t occur very often. I will reveal that right away. It’s rather rare, but as is typical, some of the things that don’t occur very often usually have the highest probability scenarios, so that kind of goes hand in hand. You might want to create a scan for this, pretty easy to create a scan for this and look for it, and if you’re a stock trader, for example, you will find setups like this long as you have a lot of different markets to scan for. The good news is it’s a very high probability trade and that’s why it’s one of my favorites, of course. So let’s look at this and it’s called the candlestick kicker. Now, it’s named kicker for a very good reason.
Let me first give you the rules for it. First of all, it is a two bar Japanese candlestick pattern and we’re going to start it out on the hard right edge of the screen here. So those are the two bars that were looking for. What are the rules? The rules are at bar number one of those two, it must be a bearish bar. And by bearish I simply mean that the close is below the open. So on mine, it shows red when the close is below the open and then shows green when the open is above the close. That’s number one and we want to see it after a bit of a down move. It doesn’t have to be a downtrend necessarily. But I want to at least see a half cycle down and it closes the last bar.
Candlestick patterns explained with examples
This is the key. The last bar in that move down must be a bearish bar where it closes near the low and definitely closes below the open. So that’s rule number one. Now, bar number two must be a bullish bar and again basically means a green bar or the close is above the open. Now, that’s all good and great, but there’s more to it. And this is what really makes it the kicker. The thing is here, we’ve got to have a gap, right? And there’s your gap. Technically the gap will always actually go all the way down to here. If you want to use the most conservative rules, then you would say the bottom of this bar, the low of this bar must be above the high of that bar.
Now, that’s not one of the actual rules for a kicker, but if you want to be real conservative about it, you could do that because the bigger the gap, or I should say, the more prominent the gap, the more they get holds, the more power there is behind the kicker. So, the low of this bar, sometimes the wick would come down into the range of this wick. And that’s usually okay. What’s not okay is if it comes down to the clothes for sure. And most people don’t want it to come into the real body of the previous bar. So, the more you allow it to come down, the less conservative the trade is because the less impulse that move had up and that’s what we’re looking for. That’s the whole point of this pattern is that there is a big change in sentiment overnight.
Candlestick patterns for day trading
Now, I say overnight because this does tend to work best on daily bars, also weekly and monthly bars. But you won’t see it as much on intraday bars. And that’s because markets tend to gap overnight more than they do intraday. Here’s the logic behind the pattern. Something happened from one day to the next that dramatically shifted the sentiment of the market. The market participants went from being bearish to not only being bullish but being really bullish so that the thing that it gapped up and turned into a bullish bar. And so it’s usually news or it could be just rumor. But the point is that if it’s a daily bar and it closes above the open, then it’s usually not a rumor or gossip that just lasted for five minutes, a half hour or an hour, right?
It lasted the whole day. And so that means the market had enough time throughout the day to digest the news and say this is real, this is our sentiment. Whereas if it was just gossip or a rumor, then you might get a gap up, but then it comes back down after the market is up. That was not real. That was fake news, so to say. And let’s see what happened after that. So it goes up pretty nicely. And now, again, the last thing I want to say about this is that this is just a two-bar candlestick pattern, meaning that, and I’ll highlight here again for you, meaning that you can’t use this alone. So I think it’s fine to incorporate it into a screener of some sort, but you have to then interpret it in the context of the chart.
Candlestick pattern indicator
In other words, is it coming in at a trend? Let’s say it’s coming into the end of a long trend, up or long trend down. By the way, the bearish pattern would be just the opposite of this. You can get bearish kickers as well, so this is not when that’s really occurring in a trend, but you do want at least a half a cycle if it’s just in the middle of a sideways market, I wouldn’t give much credence at all because we, again, want them to be a bearish sentiment going into this. And then the sentiment to change dramatically. That’s really the whole point of it. Now, from this point, either use any other rules in your trading method in order to decide where to get out and all of that.
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So this would be one part of a trading methodology. Certainly not something that you trade in isolation. But it’s a nice little pattern. And I’ll tell you, there’s a logical reason why these happen and they’re pretty high probability. So I would definitely consider adding this to your trading methodology. If it looks good to you. Well, if you got value out of this video, then go ahead and click the thumbs up icon. Leave a comment below, I love your comments, feel free to share it with other people. It’s good to share good things with good people. So click the share button below and share it with others.
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