Kindle Notes & Highlights
The ability to see the market as it is rather than how you want it to be is one of the most important skills of a successful trader.
Some traders prefer to use a candle’s close for reference, but experience has shown me that the lows and highs of the candle are better indicators of where to place support and resistance levels.
The longer the time frame, the more accurate the support and resistance lines will be.
To be more accurate, it’s a good idea to find every candle’s high/low rather than its closing value.
The two most important candlestick patterns used in conjunction with supply and demand levels are the pin bar and the engulfing pattern.
In my experience, the best time frames to spot supply and demand zones are the 4-hour chart and the daily chart.
Look at the chart and try to spot many large candles in a row; it’s important that price moves with momentum and speed.
Establish the beginning price base that started the quick move.
There’s typically a small sideways move before a large move, and that’s where your supply ...
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The most important thing to look for when identifying supply and demand zones is a sharp move in either direction (up or down),
For a pin bar to form, traders look at the real body to be relatively small and the tail of the candle to be much longer; the longer the tail the better. While not a general rule, savvy traders look for the the tail to be long enough for the real body to fit into it at least two times.
When two or more technical indicators point to a reversal from the same area, the market is said to form a confluence zone.
In principle, the more times price touches a trend line, the weaker the trend becomes.
Trying to use a bearish engulfing candlestick pattern as a reversal market indicator is not effective. The power of this pattern is in following the trend.
Here are some of the other technical tools that are used in conjunction with candlestick patterns and the bullish engulfing and bearish engulfing patterns. Moving averages Fibonacci levels Chart patterns Indicators such as RSI, MACD, Stochastic, etc.
In order to qualify an inside bar as a continuation pattern, the following conditions should be met. A well-established bullish or bearish trend. No major support/resistance levels near the pattern.
For an inside bar to be considered as a reversal pattern, there should be an inside bar form around a major support or resistance area.
